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