Assume the following information for a capital budgeting proposal with a five-year time horizon:

Initial investment:
Cost of equipment (zero salvage value)	$ 405,000
Annual revenues and costs:
Sales revenues	$ 300,000
Variable expenses	$ 130,000
Depreciation expense	$ 50,000
Fixed out-of-pocket costs	$ 40,000

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming a discount rate of 12%, this proposals profitability index is closest to:

Multiple Choice

• 1.16.

• 1.25.

• 1.21.

• 1.11.