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A proposed project has an initial cost of $ 2 0 0 , 0 0 0 and cash flows of $ 1 3 , 2

A proposed project has an initial cost of $200,000 and cash flows of $13,200, $124,500, and $187,900 for Years 1 to 3, respectively. Victoria, the boss, insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted. She also insists on applying a discount rate of 14 percent to all cash flows. Based on these criteria, the project should be: accepted because the profitability index is 1.17.
rejected because the profitability index is .95.
rejected because the profitability index exceeds 1.
accepted because the profitability index is .89.
rejected because the profitability index is 1.06.

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