(LO 3) The following information is available for a potential capital investment.
Initial investment | $80,000 |
Salvage value | 10,000 |
Net annual cash flow | 14,820 |
Present value of net annual cash flows | 98,112 |
Net present value | 18,112 |
Useful life | 10 years |
The potential investment’s profitability index (rounded to two decimals) is:
a. 5.40. c. 1.23.
b. 1.19. d. 1.40.