Question

Deibel Corporation is considering a project that would require an investment of $59,000. No other cash outflows would be involved. The present value of the cash inflows would be $66,080. The profitability index of the project is closest to:A. 0.88B. 0.12C. 1.12D. 0.11

Answer 1

C. 1.12

Step-by-step explanation:

Present value of the cash inflows = $66,080

Investment = $59,000

The profitability index is the ratio between the present value of the cash inflows resulting from the investment and the unvested value.

The profitability index for Deibel Corporation's investment is given by:

`PI = (\$66,080)/(\$59,000) \\PI=1.12`

The profitability index of the project is 1.12