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A company is considering two mutually exclusive projects, the company's required return is 8 percent and they do not have any capital constraints. Based on
A company is considering two mutually exclusive projects, the company's required return is 8 percent and they do not have any capital constraints. Based on the profitability index, what is your recommendation concerning these projects? Project A Year Cash Flow 0 -$38,500 $20,000 2 $24,000 Project B Year Cash Flow 0 -$42,000 $10,000 2 $40,000 1 1 You should accept both projects since both of their Pls are positive. You should accept project A since it has the higher Pl. You should accept both projects since both of their Pls are greater than 1. You should only accept project B since it has the largest Pl and the Pl exceeds 1 Neither project is acceptable
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