What is profitability index and sunk costs

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Reference no: EM132050628

1. A project has the following cash flows, for years 0 through 3 respectively: -21,208, 11,916, 14,745, 14,465. If the required return is 10.6 percent, what is the profitability index?

2. Your company plans to spend $1,750,000 cash to build a plant that will produce benefits with a total present value of $3,000,000. Your company already owns the land on which it will build the plant. That land was purchased with cash several years ago for $300,000, which is the current book value of the land. The land could be sold for $1,275,000 after-tax today. What is the net present value of the proposed plant?

A) ($325,000)

B) ($25,000)

C) $0

D) $950,000

E) $1,250,000

3. Sunk costs are:

A) Already incurred

B) Not recoverable

C) Not incremental

D) Ignored in the capital budgeting process

E) All of the above

Reference no: EM132050628

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