5.

Assume the following information for a capital budgeting proposal with a five-year time horizon:

Initial investment:
Cost of equipment (zero salvage value)	$ 395,000
Annual revenues and costs:
Sales revenues	$ 300,000
Variable expenses	$ 130,000
Depreciation expense	$ 50,000
Fixed out-of-pocket costs	$ 40,000

Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

Assuming a discount rate of 12%, this proposals profitability index is closest to: