Joe Vandelay buys a piece of equipment for $200,000. He puts down $40,000 and finances $160,000 from a local bank. Joe s opportunity cost is 5%, and the bank charges 10% on the loan. The after-tax cash flows generated from the equipment are $54,000 per year for the next 5 years.

What is the profitability index?

	a.	0.97
	b.	1.05
	c.	1.13
	d.	0.86