Lane Industries is considering the replacement of one of its machines. Several alternative are under consideration. The relevant cash flows associated with each are shown in the following table. The firms cost of capital is 15%.

Cash inflowsInitial Inv.Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8

Press A$106,250$22,500$22,500$22,500$22,500$22,500$22,500$22,500$22,500

Press B$75,000$15,000$17,500$20,000$22,500$25,000$31,250

Press C$162,500$62,500$37,500$25,000$25,000$25,000$37,500$50,000$62,500

Calculate the profitability index (PI) for each machine and rank the machines from best to worst using PI.

Show answer choices

RankPressPIAcceptability

1C1.12Accept

2A1.05Accept

3B1.04Accept

RankPressPIAcceptability

1C1.92Accept

2B1.44Accept

3A1.05Accept

RankPressPIAcceptability

1C1.12Accept

2B1.04Accept

3A0.95Accept

RankPressPIAcceptability

1C1.12Accept

2B1.04Accept

3A0.95Reject