1. Assume that a company is considering buying a new piece of equipment for $200,000 that would have a useful life of five years and a salvage value of $30,000. The equipment would generate the following estimated annual revenues and expenses:

   Revenues				$	120,000
   Less operating expenses:
   Commissions	$	15,000
   Insurance		5,000
   Depreciation		34,000
   Maintenance		30,000			84,000
   Net operating income				$	36,000

   Assuming a discount rate of $15%, the profitability index for this investment is closest to:

   		1.35
   		1.17
   		1.25
   		1.47