Find out the profitability index (PI) of the following project assuming the required rate of return is
Question:
Find out the profitability index (PI) of the following project assuming the required rate of return is 8%. Will you accept the project? Why?
year 0 1 2 3 4 5
Cash Flow ($) -250,000 50,000 40,000 120,000 80,000 45,000
Group of answer choices
Accept the project because the PI is equal to 1.06, which is larger than 0.
Accept the project because the PI is equal to 0.98, which is larger than 0.
Reject the project because the PI is equal to 1.06, which is larger than 1.
Reject the project because the PI is equal to 0.98, which is lower than 1.
Accept the project because the PI is equal to 1.06, which is larger than 1.