Question
Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the
Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept.
| Cash Flow | Project A | Project B | ||
| Year 0 | $1,800,000 | $2,300,000 | ||
| Year 1 | $300,000 | $1,150,000 | ||
| Year 2 | $450,000 | $1,000,000 | ||
| Year 3 | $600,000 | $850,000 | ||
| Year 4 | $750,000 | $700,000 | ||
| Year 5 | $900,000 | $550,000 | ||
| Discount rate | 8% | 17% | ||
What is the PI of project A? (round to two decimal places)
accepted or rejected?
What is the PI of project B? (round to two decimal places)
accepted or rejected?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Quantitative Analysis For Management
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Hale
14th Edition
0137943601, 9780137943609
