Profi tability Index versus NPV Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in
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Profi tability Index versus NPV Hanmi 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 fl ows of the three independent projects for Hanmi. Assume the discount rate for Hanmi is 10 percent. Further, Hanmi Group has only $30 million to invest in new projects this year.
a. Based on the profi tability index decision rule, rank these investments.
b. Based on the NPV, rank these investments.
c. Based on your fi ndings in
(a) and (b), what would you recommend to the CEO of Hanmi Group and why? LO.1
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