The following information is provided by Horowitz Systems
Project A Project B Project C Project D
Initial investment $422,000 $206,000 $550,000 $500,000
PV of cash inflows $580,000 $392,000 $814,000 $408,000
Payback period (years) 3.6 3.2 4.0 2.0
NPV of project $158,000 $186,000 $264,000 $92,000
What is the profitability index for Project C? (Round your answer to two decimal places.)
A) 1.48
B) 1.38
C) 1.26
D) 1.23
A .A) Profitability Index = Present value of net cash inflows / Initial investment = $814,000 / $550,000 = 1.48
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