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Sheffield, Inc. is considering purchasing equipment costing $54000 with a 6-year useful life. The equipment...

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Accounting

Sheffield, Inc. is considering purchasing equipment costing $54000 with a 6-year useful life. The equipment will provide annual cost savings of $15000 and will be depreciated straight-line over its useful life with no salvage value. Sheffield requires a 10% rate of return.

Present Value of an Annuity of 1

Period 8% 9% 10% 11% 12% 15%

6 4.623 4.486 4.355 4.231 4.111 3.784

What is the approximate profitability index associated with this equipment?

0.73

1.21

1.33

1.18

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