1)Distant-Light Ltd has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. The following has been determined.

Solar Wind

Present value of annual cash flows $52,580 $128,450

Initial investment $39,500 $105,300

What is the profitability index of Solar

a)0.75

b)3.02

c)1.33

d)4.02

2)Distant-Light Ltd has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. The following has been determined.

Solar Wind

Present value of annual cash flows $52,580 $128,450

Initial investment $39,500 $105,300

What is the net present value of Solar

		a)$13,080
		b)$23,150
		c)$92,080
		d)$13,800

3)Distant-Light Ltd has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. The following has been determined.

Solar Wind

Present value of annual cash flows $52,580 $128,450

Initial investment $39,500 $105,300

What is the net present value of Wind

		a)$23,510
		b)$23,150
		c)$233,750
		d)$128,450

4)Distant-Light Ltd has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. The following has been determined.

Solar Wind

Present value of annual cash flows $52,580 $128,450

Initial investment $39,500 $105,300

Explain the profitability index to Distant-Light Ltd. The profitability index:

		a)does not take into account the discounted cash flows.
		b)is calculated by dividing total cash flows by the initial investment.
		c)allows comparison of the relative desirability of projects that require differing initial investments.
		d)will never be greater than 1.

5)Distant-Light Ltd has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. The following has been determined.

Solar Wind

Present value of annual cash flows $52,580 $128,450

Initial investment $39,500 $105,300

Based on the Profitability Index, which energy source should be chosen? Why?

		a)Wind as it is more profitable
		b)Solar as it is less profitable
		c)Solar as it is more profitable
		d)Wind as it is less profitable