p r o f it a bility ind e x consider the following projects p r oject c 0 c 1 c 2 a 736628
P r o f it a bility Ind e x. Consider the following projects:
P r oject C 0 C 1 C 2
|
A |
–$2,100 |
+$2,000 |
+$1,200 |
|
B |
– 2,100 |
+ 1,440 |
+ 1,728 |
a. Calculate the profitability index for A and B assuming a 20 percent opportunity cost of capital.
b. Use the profitability index rule to determine which project(s) you should accept (i) if you could undertake both and (ii) if you could undertake only one.