Reference no: EM131725737

Question - Cedar City Public Transportation is considering adding a new bus route. To do so, the entity would be required to purchase a new $600,000 bus, which would have a 10-year life and no salvage value. If the new bus is purchased, Cedar City Public Transportation's managers expect net cash inflows from bus ridership would rise by $91,000 per year for the life of the bus. Cedar City Public Transportation uses a 9 percent required rate of return for evaluating capital projects.

Use Table 1 and Table 2 present value tables to solve following problems.

Compute the profitability index of the bus investment. Round your answer to two decimal places.

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