A project has the following cash flows:CF 0 -10,000CF 1 $1,500CF 2 $4,400CF 3 $5,000CF 4 $3,800Assuming a required rate of return of 15%,would management accept this project?NPV @ r = 15% = $10,092 (rounded up)PV (Costs) = $10,000PI = $10,092 / $10,000 = 1.009
A)1.01
B)1.10
C)1.20
D)1.33

Question

Quizplus · Accepted Answer

The project has a positive net present value (NPV) of $10,092 at a required rate of return of 15% and a profitability index (PI) of 1.009, which is greater than 1.0. This indicates that the project's benefits exceed its costs and the firm should accept the project. The best choice is A because it matches the calculated PI value.

A Project Has the Following Cash Flows:CF 0 -10,000CF 1