Pixie Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects for Pixie. Assume the discount rate is 10 percent. Further, Pixie Group has only $55 million to invest in new projects this year.

a. Based on the profitability index decision rule, rank these investments.
b. Based on the NPV, rank these investments.
c. Based on your findings in (a) and (b), what would you recommend to the CEO of Pixie Group
and why?

Transcribed Image Text:

CASH FLOWS (IN S MILLIONS) YEAR CDMA G4 WI-FI $20 36 23 10 $35 29 73 61 S55 43 105 85