A profitability index can be used to rank investment proposals. Required:A. Define the profitability index.B. Two projects are under consideration. Project I has a net present value of $20,000 whereas project II has a net present value of $200,000. Which project is better? Explain. What weakness in a net-present-value analysis does the profitability index address?
What will be an ideal response?
A. The profitability index equals the present value of a project's cash inflows divided by the initial investment.
B. Both projects provide a return greater than the hurdle rate and both are acceptable. It is not possible to say which one is better. The profitability index provides a ratio that is not influenced by the size of the project-a limitation of net-present-value (NPV) analysis. Thus, a project that has a greater NPV and a greater profitability index generally will be more attractive than another project against which it is being compared.
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Below is financial data for Computech Industries' current year. Net sales on account during year $500,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 Refer to the data for Computech Industries. Based on this information, what is the accounts
receivable turnover for the current period? a. 10.0 times b. 12.5 times c. 11.1 times d. 14.3 times
A method used to determine if specific programs are achieving goals is called ______.
A. systems theory B. program evaluation C. statistical benchmarking D. effectiveness evaluation
The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site:Construction Sites:ABCDTons Delivered:2,0003,5004,0001,500How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations.)
A. $21,818 B. $2,000 C. $30,000 D. None of the answers are correct.
Which of the following is an example of liquidity analysis?
A) Total liabilities are divided by total assets. B) Net income is divided by average total assets. C) Net income is divided by the average number of common shares outstanding. D) Quick assets are divided by current liabilities.