Question 3

Given 10% discount rate, what is the profitability index of the investment project described below?

1. 1.00
2. 0.90
3. 0.95
4. 1.03
5. 1.09

Question 4

What is the best method to use when expressing investment profitability as a percentage? Pick from the answers given below.

1. Payback period
2. Discounted payback period
3. NPV
4. AAR
5. IRR

\begin{tabular}{|c|c|} \hline Year & Cash Flows (\$) \\ \hline 0 & 78,000 \\ \hline 1 & 30,000 \\ \hline 2 & 28,000 \\ \hline 3 & 46,000 \\ \hline \end{tabular}