Determining the opportunity cost of capital
The profitability index for a project costing $40,000 and returning $15,000 annually for four years at an opportunity cost of capital of 12% is:
a) 0.139
b) 0.320
c) 0.500
d) 0.861
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The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on, one-year installment loan, payable in 4 equal quarterly payments. What is the approximate (nominal) rate of interest on the 10.19 percent add-on loan?
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