Assume that a company is considering purchasing a machine for $44,250 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The companys required rate of return is 18%. The profitability index for this investment is closest to:

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

Multiple Choice

0.83.

1.16.

1.20.

1.26.