Assume the following information for a capital budgeting proposal with a five-year time horizon: ...
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Accounting
Assume the following information for a capital budgeting proposal with a five-year time horizon:
| Initial investment: | |||
| Cost of equipment (zero salvage value) | $ | 445,000 | |
| Annual revenues and costs: | |||
| Sales revenues | $ | 300,000 | |
| Variable expenses | $ | 130,000 | |
| Depreciation expense | $ | 50,000 | |
| Fixed out-of-pocket costs | $ | 40,000 | |
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming a discount rate of 12%, this proposals profitability index is closest to:
Multiple Choice
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1.05.
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1.00.
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1.10.
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1.14.
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