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. What is the PI of project A? What is the PI of project B? Which project should be chosen and why?
| Cash Flow | Project A | Project B |
| Year 0 | -1800000 | -2500000 |
| Year 1 | 500000 | 1250000 |
| Year 2 | 600000 | 1150000 |
| Year 3 | 700000 | 1050000 |
| Year 4 | 800000 | 950000 |
| Year 5 | 900000 | 850000 |
| Discount rate | 6% | 18% |
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