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The management of Leitheiser Corporation is considering a project that would require an initial investment of...

The management of Leitheiser Corporation is considering a project that would require an initial investment of $41,000. No other cash outflows would be required. The present value of the cash inflows would be $52,580. The profitability index of the project is closest to (Ignore income taxes.):

Multiple Choice

  • 0.72

  • 1.28

  • 0.28

  • 0.22

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Answer #1

Project profitability index

= Net present value /investment required

= (52,580-41,000)/41,000

= 0.28

Option C is the answer

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