Question
Consider the following projects with a cost of capital= 14%: Year Project M. Project T -$250,000. -320,000 1. $150,000. 110,000 2 $100,009. 150,000 3. $70,000.
Consider the following projects with a cost of capital= 14%:
Year Project M. Project T
-$250,000. -320,000
1. $150,000. 110,000
2 $100,009. 150,000
3. $70,000. 170,000
What does the Profitability Index specifically measure? What is the PI for each project? Which project(s) are acceptable based on PI? Can PI accurately distinguish between mutually exclusive projects (if so, which project would you choose)?
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Financial Reporting and Analysis
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
7th edition
1259722651, 978-1259722653
