Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows:

Cost of new equipment	$ 195,000
Working capital required	$ 50,000
Annual net cash inflows	$ 100,000
Maintenance and repairs in third year	$ 40,000
Salvage value of equipment in fourth year	$ 30,000

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

Assuming the companys required rate of return is 15%, the profitability index of the project is closest to:

Multiple Choice

1.25.

1.16.

1.33.

1.20.

r1[1((1+r))n1] EXHIBIT 14B-1 https://ezt.prod.mheducation.com/Media/ Present Value of $$1 garrison18e/exhibit/Exhibit_14B_1.htm \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline rio & % & 5% & % & 7% & 8% & % & 0% & 1% & 2% & 3% & 1% & 15% & 16% & 17% & 18% & 19\% & 0% & 1% & 22% & 23% & % & 25% \\ \hline 1 & 962 & 52 & 943 & 935 & 926 & 917 & 909 & & 0.893 & 0.885 & 0.877 & 870 & 862 & & & 840 & & 0.826 & 0.820 & 813 & 0.806 & 800 \\ \hline 2 & & & & & & & & & & & & & & & & & & & & & & \\ \hline & & & & & & & & & 12 & & & & & & & & & & & & & \\ \hline 4 & & & 92 & & & & & & 636 & 61 & & & 57 & & & & & .46 & & & & 41 \\ \hline 5 & 22 & & 747 & 713 & 581 & 550 & 621 & & 567 & 543 & 19 & 49 & 476 & 456 & & 419 & & .38 & 5 & & 41 & 328 \\ \hline 6 & 90 & 746 & 705 & 666 & 630 & 596 & 564 & & .507 & .480 & 456 & 432 & 410 & 390 & 370 & 352 & 50 & & 303 & & 275 & 262 \\ \hline 7 & 60 & & 665 & 623 & 583 & 547 & 513 & & .452 & 425 & 400 & 376 & 354 & 333 & & 0.296 & & .263 & 249 & 235 & .222 & .210 \\ \hline 8 & & & & & & & 7 & & 404 & 376 & & & 05 & 285 & & 249 & & 21 & .204 & & 79 & 168 \\ \hline 9 & & & & & & & & & 361 & & & & 03 & 43 & & .209 & & & 6/ & & 1.144 & .12 \\ \hline 10 & & & & 508 & & & & & 322 & .29 & 0.270 & 24 & .227 & 208 & 191 & 6 & 62 & .12 & & 20 & 16 & .10 \\ \hline 11 & & & & 475 & & & & & 81 & 201 & 251 & 21 & 193 & 10 & & .148 & & .12 & .1 & 05 & 094 & .000 \\ \hline 12 & & & 497 & 444 & 991 & 356 & 319 & & 257 & 0.231 &.