The profitability index at 10% per year for a project that has an initial investment of $400,000,

Question:

The profitability index at 10% per year for a project that has an initial investment of $400,000, an AOC of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life is closest to:

(a) 0.95

(b) 1.06

(d) 0.86

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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