CAPITAL BUDGETING

/RCROQUE

1. The relevance of a particular cost to a decision is determined by

a. Riskiness of the decision
b. Number of decision variables
c. Amount of the cost
d. Potential effect on the decision

2. In equipment-replacement decisions, which one of the following does not affect the decision-making process?
a. Current disposal price of the old equipment
b. Operating costs of the old equipment
c. Original fair market value of the old equipment
d. Cost of the new equipment

3. The term that refers to costs incurred in the past that are not relevant to a future decision is
a. Discretionary cost
b. Full absorption cost
c. Under allocated indirect cost
d. Sunk cost

4. Which one of the following statements concerning cash flow determination for capital budgeting purposes is not correct?
a. Tax depreciation must be considered because it affects cash payments for taxes
b. Book depreciation is relevant because it affects net income
c. Sunk costs are not incremental flows and should not be included
d. Net working capital changes should be included in cash flow forecasts

5. A depreciation tax shield is

a. An after-tax cash outflow
b. A reduction in income taxes
c. Te cash provided by recording depreciation
d. The cash outflow

6. New Year Corporation is evaluating a lease that takes effect on March 1, 2016. The company must make eight equal payments,
with the first payment due on March 1, 2016. The concept most relevant to the evaluation of the lease is
a. The present value of an annuity due
b. The present value of an ordinary annuity
c. The future value of an annuity due
d. The future value of an ordinary annuity

7. Three Kings, Inc. has P75,000 in a bank account as of December 31, 2016. If the company plans on depositing P4000 in account
at the end of each of the next 3 years (2017,2018 and 2019) and all amounts in the account earn 8 per year, what will the
account balance be at December 31, 2019? Ignore the effect of income taxes
8% Interest Rate Factors
Future Value of an Future Value of an
Period Amount of P1 Ordinary Annuity of P1
1 1.08 1
2 1.17 2.08
3 1.26 3.25
4 1.36 4.51
a. P87,000
b. P88,000
c. P96,070
d. P107,500

8. Valentine Corp. is expanding its plant, which requires an investment of P8 million in new equipment. Valentine’s sales are
expected to increase by P6 million per year as a result of the expansion. Cash investment in current assets averages 30% of
sales, and accounts payable and other current liabilities are 10% of sales. What is the estimated total cash investment for this
expansion?
a. P6.8 million
b. P8.6 million
c. P9.2 million
d. P9.8 million
9. Birthday Company has P150,000 in a bank account as of December 31, 2016. If the company plans to deposit P8,000 in the
account at the end of each of the next 3 years (2017, 2018 and 2019) and all amounts in the account earn 8% per year, what
will the account balance be at December 31, 2019? Ignore the effect of income taxes.
Use the following 8% interest rate factors for this question:
Future Value Future Value
Period of P1 Annuity of P1
1 1.08 1
2 1.17 2.08
3 1.26 3.25
4 1.36 4.51
a. P174,000
b. P176,000
c. P192,140
d. P215,000

10. Of the following decisions, capital budgeting techniques would least likely be used in evaluating the
a. Acquisition of new aircraft by a cargo company
b. Design and implementation of a major advertising program
c. Trade for a captain ball by a basketball team
d. Adoption of a new method of allocating non-traceable costs to product lines

11. Holy Week Company has a payback goal of 3 years on new equipment acquisitions. A new sorter is being evaluated that costs
P450,000 and has a 5-year life. Straight-line depreciation will be used; no salvage is anticipated. Holy Week is subject to a 40%
income tax rate. To meet the company’s payback goal, the sorter must generate reductions in annual cash operating costs of
a. P60,000
b. P100,000
c. P150,000
d. P190,000

12. The length of time required to recover the initial cash outlay of a capital project is determined by using the
a. Discounted cash flow method
b. Payback method
c. Weighted net present value method
d. Net present value method

13. A characteristics of the payback method (before taxes) is that is

a. Incorporates the time value of money
b. Uses accrual accounting inflows in the numerator of the calculation
c. Neglects total project profitability
d. Uses the estimated expected life of the asset in the denominator of the calculation

14. Which one of the following statements about the payback method of investment analysis is correct? The payback method
a. Does not consider the time value of money
b. Considers cash flows after the payback has been reached
c. Uses discounted cash flow techniques
d. Generally leads to the same decision as other methods for long-term projects

15. The payback reciprocal can be used to approximate a project’s

a. Profitability index
b. Net present value
c. Accounting rate of return if the cash flow pattern is relatively stable
d. Internal rate of return if the cash flow pattern is relatively stable

16. The bailout payback method

a. Incorporates the time value of money
b. Equals the recovery period from normal operations
c. Eliminates the disposal value from the payback calculations
d. Measures the risk if a project is terminated.

17. Bataan Co. is considering the acquisition of a new, more efficient press. The cost of the press is P360,000, and the press has
an estimated life of 6 years with zero salvage value. Bataan uses straight-line depreciation, for both financial reporting and
income tax reporting purposes and has a 40% corporate income tax rate. In evaluating equipment acquisitions of this type,
Bataan uses a goal of a 4-year payback period. To meet Bataan’s desired payback period, the press must produce a minimum
annual before-tax operating cash savings of
a. P90,000
b. P110,000
c. P114,000
 d. P150,000

18. When evaluating projects, break-even time is best described as

a. Annual fixed costs + monthly contribution margin
b. Project investment + annual net cash inflows
c. The point where cumulative cash inflows on a project equal total cash outflows
d. The point at which discounted cumulative cash inflows on a project equal discounted total cash outflows

Items 19 to 22 are based on the following information:

In order to increase production capacity, a company is considering replacing an existing production machine with a new
technologically improved machine effective January 1, 2016. The following information are being considered:
➢ The new machine would be purchased for P160,000 in cash. Shipping, installation, and testing would cost an additional
P30,000
➢ The new machine is expected to increase annual sales by 20,000 units at a sales price of P40 per unit. Incremental
operating costs include P30 per unit variable costs and total fixed costs of P40,000 per year
➢ The investment in the new machine will require an immediate increase in working capital of P35,000. This cash outflow
will be recovered at the end of year 5
➢ The company uses straight-line depreciation for financial reporting and tax reporting purposes. The new machine has
an estimated useful life of 5 years and zero salvage value.
➢ The company is subject to a 40% corporate income tax rate.

The company uses the net present value method to analyze the investments and will employ the following factors and rates:
Present Value of Present Value of an Ordinary
Period P1 at 10% Annuity of P1 at 10%
1 0.909 0.909
2 0.826 1.736
3 0.751 2.487
4 0.683 3.170
5 0.621 3.791

19. The company’s net cash outflow in a capital budgeting decision is

a. P190,000
b. P195,000
c. P204,525
d. P225,000

20. The company’s discounted annual depreciation tax shield for the year 2016 is
a. P13,817
b. P16,762
c. P20,725
d. P22,800

21. The acquisition of the new production machine will contribute a discounted net-of-tax contribution margin of
a. P242,624
b. P303,280
c. P363,936
d. P454,920

22. The overall discounted cash flow impact of the company’s working capital investment for the new production machine would be
a. P(7,959)
b. P(10,080)
c. P(13,265)
d. P(35,000)

23. The net present value (NPV) method of investment project analysis assumes that the project’s cash flows are reinvested at the
a. Computed internal rate of return
b. Risk-free interest rate
c. Discount rate used in the NPV calculation
d. Firm’s accounting rate of return

24. Kagitingan Industries s replacing a grinder purchased 5 years ago for P15,000 with a new one costing P25,000 cash. The
original grinder is being depreciated on a straight-line basis over 15 years to a zero salvage value; Kagitingan will sell this old
equipment to a third party for P6,000 cash. The new equipment will be depreciated on straight-line basis over 10 years to a zero
salvage value. Assuming a 40% marginal tax rate, Kagitingan’s net cash investment at the time of purchase if the old grinder is
sold and the new one purchased is
a. P19,000
b. P15,000
 c. P17,400
d. P25,000

25. Labor Day, Inc. is considering a 10-year capital investment project with forecasted revenues of P40,000 per year and forecasted
cash operating expenses of P29,000 per year. The initial cost of the equipment for the project is P23,000 and Labor Day expects
to sell the equipment for P9,000 at the end of the tenth year. The equipment will be depreciated over 7 years. The project
requires a working capital investment of P7,000 at its inception and another P5,000 at the end of year 5. Assuming a 40%
income tax rate, the expected net cash flow from the project in the tenth year is
a. P32,000
b. P24,000
c. P20,000
d. P11,000

26. The rankings of mutually exclusive investments determined using the internal rate of return method (IRR) and the net present
value method (NPV) may be different when
a. The lives of the multiple projects are equal and the size of the required investments are equal
b. The required rate of return equals the IRR of each project
c. The required rate of return is higher than the IRR of each project
d. Multiple projects have unequal lives and the size of the investment for each project is different

27. The proper discount rate to use in calculating certainty equivalent net present value is the
a. Risk-adjusted discount rate
b. Cost of capital
c. Risk-free rate
d. Cost of equity capital

28. Independence Corp. has not yet decided on its hurdle rate for ue in the evaluation of capital budgeting projects. This lack of
information will prohibit Independence from calculating a project’s
Accounting Rate Net Present Internal Rate
of Return Value of Return
a. no no no
b. yes yes yes
c. no yes yes
d. no yes no

29. When determining net present value in an inflationary environment, adjustments should be made to
a. Increase the discount rate only
b. Increase the estimated cash inflows and increase the discount rate
c. Increase the estimated cash inflows, but not the discount rate
d. Decrease the estimated cash inflows and increase the discount rate

30. All of the following items are included in discounted cash flow analysis, except
a. Future operating cash savings
b. The current asset disposal price
c. The future asset depreciation expense
d. The tax effects of future asset depreciation

31. The capital budgeting model that is ordinarily considered the best model for long-range decision-making is the
a. Payback model
b. Accounting rate of return model
c. Unadjusted rate of return model
d. Discounted cash flow model

32. The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a
project has the effect of
a. Raising the hurdle rate necessary to justify has project
b. Lowering the net present value of the project
c. Increasing the present value of the depreciation tax shield
d. Increasing the cash outflows at the initial point of the project

Items 33 to 35 are based on the following information:

Beauty, Inc. uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the
upcoming year
Project A Project B Project C Project D
Initial capital outlay P200,000 P298,000 P248,000 P272,000
 Annual net cash inflows:
Year 1 P65,000 P100,000 P80,000 P95,000
Year 2 70,000 135,000 95,000 125,000
Year 3 80,000 90,000 90,000 90,000
Year 4 40,000 65,000 80,000 60,000
Net present value (3,798) 4,276 14,064 14,662
Profitability index 98% 101% 106% 105%
Internal rate of return 11% 13% 14% 15%

33. Which project(s) should Beauty, Inc. undertake during the upcoming year assuming it has no budget restrictions?
a. All of the projects
b. Projects A,B and C
c. Projects B, C and D
d. Projects A, C and D

34. Which project(s) should Beauty, Inc. undertake during the upcoming year if it has only P600,000 of funds available?
a. Projects A and C
b. Projects B, C and D
c. Projects B and C
d. Project C and D

35. Which project(s) should Beauty, Inc. undertake during the upcoming year if it has only P300,000 of capital funds available?
a. Project A
b. Projects B, C and D
c. Projects C and D
d. Project C

36. The net present value (NPV) of a project has been calculated to be P215,000. Which one of the following changes in
assumptions would decrease the NPV?
a. Decrease the estimated effective income tax rate
b. Decrease the initial investment amount
c. Extend the project life and associated cash inflows
d. Increase the discount rate

37. Beast, Inc. is expanding its manufacturing plant, which requires an investment of P4 million in new equipment and plant
modifications. Beast’s sales are expected to increase by P3 million per year as a result of the expansion. Cash investment in
current assets averages 30% of sales; accounts payable and other current liabilities are 10% of sales. What is the estimated
total investment for this expansion?
a. P3.4 million
b. P4.3 million
c. P4.6 million
d. P4.9 million

38. A disadvantage of the net present value method of capital expenditure evaluation is that it
a. Is calculated using sensitivity analysis
b. Computes the true interest rate
c. Does not provide the true rate of return on investment
d. Is difficult to apply because it uses a trial-and-error approach

39. Papa, Inc. has no capital rationing constraint and is analyzing many independent investment alternatives. Papa should accept
all investment proposals
a. If debt financing is available for them
b. That have positive cash outflows
c. That provide returns greater than the before-tax cost of debt
d. That have a positive net present value

40. A company has a cost of capital of 15% and is considering the acquisition of a new machine whish costs P400,000 and has a
useful life of 5 years. The company projects that earnings and cash flow will increase as follows:

Year Net Earnings After-tax Cash Flow

1 P100,000 P160,000
2 100,000 140,000
3 100,000 100,000
4 100,000 100,000
5 200,000 100,000
 15% Interest Rate Factors
Present Present Value of
Period Value of P1 an Annuity of P1
1 0.87 0.87
2 0.76 1.63
3 0.66 2.29
4 0.57 2.86
5 0.50 3.36

The net present value of this investment is

a. Negative, P64,000
b. Negative, P14,000
c. Positive, P18,600
d. Positive, P200,000

41. The net present value of a proposed investment is negative; therefore, the discount rate used must be
a. Greater than the project’s internal rate of return
b. Less than the project’s internal rate of return
c. Greater than the firm’s cost of equity
d. Less than the risk-free rate

42. A weakness of the internal rate of return (IRR) approach for determining the acceptability of investments is that it
a. Does not consider the time value of money
b. Is not a straightforward decision criterion
c. Implicitly assumes that the firm is able to reinvest project cash flows at the firm’s cost of capital
d. Implicitly assumes that the firm is able to reinvest project cash flows at the project’s internal rate of return

43. The internal rate f return (IRR) is the

a. Hurdle rate
b. Rate of interest for which the net present value is greater than 1.0
c. Rate of interest for which the net present value is equal to zero
d. Rate of return generated from the operational cash inflows

44. The profitability index approach to investment analysis

a. Fails to consider the timing of project cash flows
b. Considers only the project’s contribution to net income and does not consider cash flow effects
c. Always yields the same accept/reject decisions for independent projects as the net present value method
d. Always yields the same accept/reject decisions for mutually exclusive projects as the net present value method

Items 45 to 47 are based from the following information:

Meldz Company’s financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data
is presented below. There will be no salvage value at the end of the investment’s life and, due to realistic depreciation practices, it is
estimated that the salvage value and net book value are equal at the end of each year. All cash flows are assumed to take place at the
end of each year. For investment proposals, Meldz uses a 12% after-tax target rate of return.
INVESTMENT PROPOSALS
Purchase Cost Annual Net Annual
Year and Book Value After-tax Cash Flow Net Income
0 P250,000 P0 P0
1 168,000 120,000 35,000
2 100,000 108,000 39,000
3 50,000 96,000 43,000
4 18,000 84,000 47,000
5 0 72,000 51,000

DISCOUNTED FACTORS FOR A 12% RATE OF RETURN

Present Value of P1 Received Present Value of an Annuity of P1
Year at the End of Each Period Received at the End of Each Period
1 0.89 0.89
2 0.80 1.69
3 0.71 2.40
 4 0.64 3.04
5 0.57 3.61
6 0.51 4.12

45. The accounting rate of return on the average investment proposal is

a. 12.0%
b. 17.2%
c. 28.0%
d. 34.4%

46. The net present value for the investment proposal is

a. P106,160
b. P(97,970)
c. P356,160
d. P96,560

47. The traditional payback period for the investment proposal is

a. Over 5 years
b. 2.23 years
c. 1.65 years
d. 2.83 years

Items 48 to 52 are based on the following information:

A proposed investment is not expected to have any salvage value at the end of its 5-year life. For present value purposes, cash
flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return.
Purchase Cost Annual Net Annual
Year and Book Value After-tax Cash Flow Net Income
0 P500,000 P0 P0
1 336,000 240,000 70,000
2 200,000 216,000 78,000
3 100,000 192,000 86,000
4 36,000 168,000 94,000
5 0 144,000 102,000
DISCOUNTED FACTORS FOR A 12% RATE OF RETURN
Present Value of P1 Received Present Value of an Annuity of P1
Year at the End of Each Period Received at the End of Each Period
1 0.89 0.89
2 0.80 1.69
3 0.71 2.40
4 0.64 3.04
5 0.57 3.61
6 0.51 4.12

48. The accounting rate of return based on the average investment is

a. 84.9%
b. 34.4%
c. 40.8%
d. 12.0%

49. The net present value is

a. P304,060
b. P212,320
c. P(70,000)
d. P712,320

50. The traditional payback period is

a. Over 5 years
b. 2.23 years
c. 1.65 years
d. 2.83 years

51. The profitability index is

a. 0.61
b. 0.42
 c. 0.86
d. 1.425

52. Which statement about the internal rate of return of the investment is true?
a. The IRR is exactly 12%
b. The IRR is over 12%
c. The IRR is under 12%
d. No information about the IRR can be determined

Items 53 to 56 are based on the following information:

CPA Corporation is considering the acquisition of a new machine at a cost of P180,000. Transporting the machine to CPA’s
plant will cost P12,000. Installing the machine will cost an additional P18,000. It has a 10-year life and is expected to have a
salvage value of P10,000. Furthermore, the machine is expected to produce 4,000 units per year with a selling price of P500
and combined direct materials and direct labor costs of P450 per unit. Tax regulations permit machines of this type to be
depreciated using the straight-line method over 5 years with no estimated salvage value. CPA has an income tax rate of 40%.

53. What is the net cash outflow at the beginning of the first year that CPA should use in a capital budgeting analysis?
a. P(170,000)
b. P(180,000)
c. P(192,000)
d. P(210,000)

54. What is the net cash flow for the third year that CPA Corporation should use in a capital budgeting analysis?
a. P136,800
b. P136,000
c. P128,400
d. P107,400

55. What is the net cash flow for the tenth year of the project that CPA should use in a capita budgeting analysis?
a. P200,000
b. P158,000
c. P136,800
d. P126,000

56. What is the approximate payback period on the new machine?

a. 1.05 years
b. 1.54 years
c. 1.33 years
d. 2.22 years

57. For capital budgeting purposes, management would select a high hurdle rate of return for certain projects because management
a. Wants to use equity funding exclusively
b. Believes too many proposals are being rejected
c. Believes bank loans are riskier than capital investments
d. Wants to factor risk into its consideration of projects

58. Sensitively analysis, if used with capital projects

a. Is used extensively when cash flows are known with certainty
b. Measures the change in the discounted cash flows when using the discounted payback method rather than the net
present value method
c. Is a “what-if” technique that asks how a given outcome will change if the original estimates of the capital budgeting
model are changed
d. Is a technique used to rank capital expenditure requests.

Capital investment decision factors

59. Press Publishers, Inc. is considering replacing an old press that cost P800,000 six years ago with a new one that would cost
P2,250,000. Shipping and installation would cost an additional P200,000. The old press has a book value of P150,000 and could
be sold currently for P50,000. The increased production of the new press would increase inventories by P40,000, accounts
receivable by P160,000 and accounts payable by P140,000. Press Publishers net initial investment for analyzing the acquisition
of the new press assuming a 35% income tax rate would be
A. P2,250,000 C. P2,450,000
B. P2,425,000 D. P2,600,000

60. Bata Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 5 years, and annual
straight-line depreciation of P20,000. The existing machine has a current market value of P100,000. The replacement machine
would cost P150,000, have a 5-year life, and save P50,000 per year in cash operating costs. If the replacement machine would
 be depreciated using the straight-line method and the tax rate is 40%, what would be the economic values relevant to me
decision?
A. B. C. D.
Net Investment P50,000 P50,000 P150,000 P150,000
Net Incremental Cash Flow P34,000 P42,000 P34,000 P42,000
Net Incremental Annual Income Taxes P16,000 P16,000 P3,000 P8,000

Non-discounted capital budgeting techniques

61. The internal rate of return method assumes that project funds are reinvested at the
A. cost of debt capital. C. hurdle rate.
B. cost of equity capital. D. rate of return earned on the project.

62. Madrigal Co. is considering an investment in a new cheese-cutting machine to replace its existing cheese cutter. Information on
the existing machine and the replacement machine follow.
Cost of the new machine P40,000
Net annual savings in operating costs 9,000
Salvage value now of the old machine 6,000
Salvage value of the old machine in 8 years 0
Salvage value of the new machine in 8 years 5,000
Estimated life of the new machine 8 years
What is the expected payback period for the new machine?
A. 2.67 years C. 4.44 years
B. 3.78 years D. 8.50 years

63. Everest Co. is considering an investment in a machine that would reduce annual labor costs by P30,000. The machine has an
expected life of 10 years with no salvage value. The machine would be depreciated according to the straight-line method over
its useful life. The company’s marginal tax rate is 30%. Assume that the company will invest in the machine of it generates a
pre-tax internal rate of return of 16%. What is the maximum amount the company can pay for the machine and still meet the
internal rate of return criterion?
A. P144,996 C. P187,500
B. P180,000 D. P210,000

64. The following data pertain to Sunlight Corp., whose management is planning to purchase an automated tanning equipment.
• Economic life of equipment – 8 years. Disposal value after 8 years – nil.
• Estimated net annual cash inflows for each of the 8 years – P81,000. Time-adjusted internal rate of return – 14%
• Cost of capital of Sunlight Corp – 16%
• The table of present values of P1 received annually for 8 years has these factors: at 14%
• = 4.639, at 16% = 4.344
• Depreciation is approximately P46,970 annually.
Find the required increase in annual cash inflows in order to have the time-adjusted rate of return approximately equal the cost of
capital.
A. P4,344 C. P5,871
B. P5,501 D. P6,501

65. Your company is purchasing a transport equipment as part of its territorial expansion strategy. The technical services department
indicated that this equipment needs overhauling in year 4 or year 5 of its useful life. The overhauling cost will be expected during
the year the overhauling is done. The finance officer insists that the overhauling be done in year 4, not in year 5. The most likely
reason is
A. There is lower tax rate in year 5.
B. There is higher tax rate in year 5.
C. The time value of money is considered.
D. Due statements A and C above.

66. An investment project is expected to yield P10,000 in annual revenues, has P2,000 in fixed costs per year, and requires an
initial investment of P5,000. Given a cost of goods sold of 60 percent of sales, what is the payback period in years?
a. 2.50
b. 5.00
c. 2.00
d. 1.25

67. Datasoft Industries is considering the purchase of a P100,000 machine that is expected to result in a decrease of P15,000 per
year in cash expenses. This machine, which has no residual value, has an estimated useful life of 10 years and will be
depreciated on a straight-line basis. For this machine, the accounting rate of return would be
a. 10%
b. 15%
 c. 30%
d. 35%

68. A project under consideration by Close Corporation would require a working capital investment of P200,000. The working
capital would be liquidated at the end of the project's 10-year life. If Close Corporation has an after-tax cost of capital of 10
percent and a marginal tax rate of 30 percent, what is the present value of the working capital cash flow expected to be
received in year 10?
a. P36,868
b. P77,100
c. P53,970
d. P23,130

69. Seabreeze Creations is considering an investment in a computer that is capable of producing various images that are useful in
the production of commercial art. The computer would cost P20,000 and have an expected life of eight years. The computer is
expected to generate additional annual net cash receipts (before-tax) of P6,000 per year. The computer will be depreciated
according to the straight-line method and the firm's marginal tax rate is 25 percent.

What is the after-tax payback period for the computer project?

a. 7.62 years
b. 3.90 years
c. 4.44 years
d. 3.11 years

70. Rhodes Corporation is involved in the evaluation of a new computer-integrated manufacturing system. The system has a
projected initial cost of P1,000,000. It has an expected life of six years, with no salvage value, and is expected to generate
annual cost savings of P250,000. Based on Rhodes Corporation's analysis, the project has a net present value of P57,625.

What is the project's profitability index?

a. 1.058
b. .058
c. .945
d. 1.000

For the next 2 items: A proposed investment is not expected to have any salvage value at the end of its 5-year life. For present value
purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return.

Purchase Cost Annual Net

Year and Book Value After-tax Cash Flow
0 P500,000 P0
1 336,000 240,000
2 200,000 220,000
3 100,000 190,000
4 36,000 164,000
5 0 140,000

DISCOUNTED FACTORS FOR A 12% RATE OF RETURN

Present Value of P1 Received Present Value of an Annuity of P1
Year at the End of Each Period Received at the End of Each Period
1 0.8929 0.8929
2 0.7972 1.6901
3 0.7118 2.4019
4 0.6355 3.0374
5 0.5674 3.6048
6 0.5066 4.1114

71. Calculate the Profitability Index (2 decimal places): _______ 1.41

72. Calculate the discounted payback period (2 decimal places) Ans. 2.82