Comparing Investment Criteria The treasurer of Amaro Canned Fruits, Inc., has projected the cash fl ows of projects A, B, and C as follows.

Suppose the relevant discount rate is 12 percent a year.

a. Compute the profi tability index for each of the three projects.

b. Compute the NPV for each of the three projects.

c. Suppose these three projects are independent. Which project(s) should Amaro accept based on the profi tability index rule?

d. Suppose these three projects are mutually exclusive. Which project(s) should Amaro accept based on the profi tability index rule?

e. Suppose Amaro’s budget for these projects is $300,000. The projects are not divisible.
Which project(s) should Amaro accept? LO.1