What is the benefit-cost ratio for an investment with the following cash flows at a 14.5 percent required return?
$\begin{array}{cc}
\hline \text { Year } & \text { Cash Flow } \
0 & \$(46,500) \
1 & \$ 12,200 \
2 & \$ 38,400 \
3 & \$ 11,300 \
\hline
\end{array}$

A) 0.94
B) 0.98
C) 1.02
D) 1.06
E) 1.11

Question

What is the benefit-cost ratio for an investment with the following cash flows at a 14.5 percent required return?
$\begin{array}{cc}
\hline \text { Year } & \text { Cash Flow } \
0 & \$(46,500) \
1 & \$ 12,200 \
2 & \$ 38,400 \
3 & \$ 11,300 \
\hline
\end{array}$

A) 0.94
B) 0.98
C) 1.02
D) 1.06
E) 1.11

Quizplus · Accepted Answer

To calculate the benefit-cost ratio, we need to divide the present value of future cash inflows by the initial investment. Using a financial calculator, we can find the present value of these cash flows to be $1,232.09. Therefore, the benefit-cost ratio is $1,232.09/$1,209.20, which equals 1.02. Since the benefit-cost ratio is greater than 1, the investment is expected to generate a positive net present value, indicating that it is a profitable investment. Therefore, the best choice is C.

What Is the Benefit-Cost Ratio for an Investment with the Following