Question: Lithium Inc. is considering two mutually exclusive projects, A & B. project cost $95,000 and is expected to generate $65,000 in year one and $75,000

Lithium Inc. is considering two mutually exclusive projects, A & B. project cost $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three and $45,000 in year four. Lithium Inc.s required rate of return for these projects is 10%. the profitability index for project A is?

A. 1.17 B. 1.27 C. 1.22 D. 1.12

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Lithium Inc. is considering two mutually exclusive projects, A & B. project cost $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. project B costs $120,000 and is...

Question 22 Lithium Inc. is considering two mually exclusive projects. A and Project Acost $95.000 and is expected to generate $65.000 in year one and $75.000 in year Project costs $120.000 expected...

DYI Construction Co. is considering a new inventory system that will cost $650,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year...

1. All the following variables are used in computing the cost of debt EXCEPT a. number of years to maturity. b. risk-free rate. 2. A significant advantage of the internal rate of return is that it a....

16 If the total cash flows = 22,000 and the cash flow at the end of the period = 200,000 then the cash flow at the beginning of the period equals :- ut of Select one: a. 420,000 O b. 222,000 C....

18.) Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000...

16. James Construction Co. is considering a new inventory system that will cost $950,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in...

19. You are considering the purchase of a share of Ranch's common stock. You expect to sell it at the end of 1 year for $32.00. You will also receive a dividend of $2.50 at the end of the year. Ranch...

Determine the moment of inertia of the beam?s cross-sectional area about the y axis. -6 in.- 2 in. 4 in. 1 in. 1 in.

Astronomers detect a distant meteoroid moving along a straight line that, if extended, would pass at a distance 3RE from the center of the Earth, where RE is the radius of the Earth. What minimum...

Higher risk, regardless of its type, always mean higher expected returns. True False

Non - verbal cues, such as body language and facial expressions, can convey a lot during conflicts and negotiations. Listening skills and spontaneous communication skills are also key to effective...

=+4. Do NGOs lose their legitimacy if they begin cooperating with the very companies whose actions they are trying to affect? Where should the line be drawn?

=+5. Many NGOs face a real issue of accountability and transparency. Any independently wealthy individual can set up a nonprofit or NGO and claim to be an expert on a particular issue. Using the...

=+4. What is your reaction to the accusation that the Islamic finance industry is generating interest-bearing loan[s] in all but name? From