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.

Answer rating: 100% (QA)

The Profitability Index PI is a financial metric used to evaluate the attractiveness of an investmen... View the full answer