1.)

Present Value of an Annuity of 1
Periods		8%		9%		10%
1		0.926		0.917		0.909
2		1.783		1.759		1.736
3		2.577		2.531		2.487

A company has a minimum required rate of return of 10%. It is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $25,000 at the end of each year for three years. The profitability index for this project is

1.00.

.80.

1.24.

1.27.

2.) The net present value method can only be used in capital budgeting if the expected cash flows from a project are an equal amount each year.

True

False

3.) One way of incorporating intangible benefits into the capital budgeting decision is to project conservative estimates of the value of the intangible benefits and include them in the NPV calculation.

True

False