Metlock, Inc. is considering purchasing equipment costing $78000 with a 6-year useful life. The equipment will provide annual cost savings of $19600 and will be depreciated straight-line over its useful life with no salvage value. Metlock requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate profitability index associated with this equipment? O 1.25 O 0.73 O 1.06 O 1.09

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Metlock, Inc. is considering purchasing equipment costing $78000 with a 6-year useful life. The equipment will provide annual cost
savings of $19600 and will be depreciated straight-line over its useful life with no salvage value. Metlock requires a 10% rate of return.
Present Value of an Annuity of 1
Period 8%
9%
10% 11% 12%
15%
6
4.623 4.486
4.355 4.231 4.111 3.784
What is the approximate profitability index associated with this equipment?
O 1.25
O 0.73
O 1.06
O 1.09
Transcribed Image Text:Metlock, Inc. is considering purchasing equipment costing $78000 with a 6-year useful life. The equipment will provide annual cost savings of $19600 and will be depreciated straight-line over its useful life with no salvage value. Metlock requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate profitability index associated with this equipment? O 1.25 O 0.73 O 1.06 O 1.09
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