Net Present Value versus Profi tability Index Consider the following two mutually exclusive projects available to Global Investments, Inc.:

The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake project A. At a luncheon for shareholders, the manager of a pension fund that owns a substantial amount of the fi rm’s stock asks you why the fi rm chose project A instead of project B when project B has a higher profi tability index.

How would you, the CFO, justify your fi rm’s action? Are there any circumstances under which Global Investments should choose project B? LO.1