The following information is provided by Glinda Systems
Project A Project B Project C Project D
Initial investment $424,000 $212,000 $552,000 $504,000
PV of cash inflows $588,000 $396,000 $800,000 $402,000
Payback period (years) 3.6 3.2 4.0 2.0
NPV of project $164,000 $184,000 $248,000 $102,000
What is the profitability index for Project B? (Round your answer to two decimal places.)
A) 1.92
B) 1.36
C) 1.25
D) 1.87
D .D) Profitability Index = Present value of net cash inflows / Initial investment = $396,000 / $212,000 = 1.87
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