Question

The Beetroot Corporation is considering two MUTUALLY EXCLUSIVE projects, Project A and Project B. The required rate of return is 10%. Project A costs $95,000 and will generate $65,000 in Year 1 and $75,000 in Year 2. Project B costs $120,000 and will generate $64,000 in Year 1, then $67,000 in Year 2, $56,000 in Year 3, and $45,000 in Year 4. The PROFITABILITY INDEX for Project B is:

Select one:

a. 1.33

b. 1.48

c. 1.39

d. 1.55

Answer 1