Item 3

Item 3 5 points

Consider projects A and B with the following cash flows:

		C0					C1					C2					C3
A			$	44			+	$	28			+	$	28			+	$	28
B				69			+		38			+		38			+		38

		C0					C1					C2					C3
A			$	44			+	$	28			+	$	28			+	$	28
B				69			+		38			+		38			+		38

a-1. What is the NPV of each project if the discount rate is 12%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a-2. Which project has the higher NPV?

b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b-2. Which project has the higher profitability index?

c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects?

d. Which project is most attractive to a firm that is limited in the funds it can raise?