Question
Calculating Profitability Index Suppose the following two independent investment opportunities are available to Relax, Inc. The appropriate discount rate is 8.5 percent. Year Project Alpha
Calculating Profitability Index Suppose the following two independent investment opportunities are available to Relax, Inc. The appropriate discount rate is 8.5 percent.
| Year | Project Alpha | Project Beta |
| 0 | -$2,100 | -$3,700 |
| 1 | 1,200 | 800 |
| 2 | 1,100 | 2,300 |
| 3 | 900 | 2,900 |
a. Compute the profitability index for each of the two projects.
b. Which project(s) should the company accept based on the profitability index rule?
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Personal Finance An Integrated Approach
Authors: Bernard J. Winger
4th Edition
0198520972, 9780132696302
