Profitability index of the machine

Question

Problem:

You have purchased a canning machine for $7,000.00. You expect the machine to save your company $3,800.00 each year for the next 10 years.

Required:

Question: What is the profitability index of the machine? Use a discount rate of 11.50%.

• 3.03
• 3.01
• 3.35
• 3.29
• 3.13

Note: Solve the problem and show all work.