ABC Manufacturing Has a Project That Requires an Initial Investment $$\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 & \$ 80000 \\2 & \$ 60000 \\3 & \$ 20000\end{array}$$

ABC Manufacturing has a project that requires an initial investment of $100 000 and has the following expected stream of cash flows:
$$\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 & \$ 80000 \\2 & \$ 60000 \\3 & \$ 20000\end{array}$$
Assuming the company's cost of capital is 12 per cent,what is the profitability index for the project?

A) .749
B) 1.335
C) 1.600
D) 2.985

Correct Answer:

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