Cima P1 Exam Question No 20

Question No 20:

An investment project requires an initial investment of $500,000 and has a residual value of $130,000 at the end of five years. The net present value of the project is $140,500 after discounting at the company’s cost of capital of 12% per annum.
The profitability index of the project is:

A. 0.38
B. 0.54
C. 0.28
D. 0.26

Answer: C