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A project manager wants to invest in a project with an initial cost of $58,500 and cash flows of $32,400 and $38,500 in Years 1
A project manager wants to invest in a project with an initial cost of $58,500 and cash flows of $32,400 and $38,500 in Years 1 and 2. The discount rate is 10%. The boss wants $1.10 for every $1 invested in the project (i.e., a profitability index PI of 1.1). Will the project manager get his project approved?
A) yes; because the PI is greater than 1
B) yes; because both criteria (NPV and PI) are met
C) yes; because the NPV is positive
D) no; NPV is positive but PI is less than 1.1
E0 no; because the project does not meet either requirement
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