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You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y 0 -$20,000 -$20,000 1 13,030 7,270 2
You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y 0 -$20,000 -$20,000 1 13,030 7,270 2 6,360 7,270 3 6,360 7,270 4 2,020 7.270 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, eg. 15.25 and final answers to 4 decimal places, eg. 1.2527) The Pi for project X is 1.15 and the PI for project Yis Which project, or projects, should be accepted if you have unlimited funds to invest? If you have unlimited funds you should invest in both projects 1.14. Which project, or projects, should be accepted if you have unlimited funds to invest? If you have unlimited funds you should invest in both projects Which project should be accepted if they are mutually exclusive? If they are mutually exclusive you should invest in Project X
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Step: 1
To calculate the profitability index PI for each project use the formula PI Net Present Value of Future Cash Flows Initial Investment PI Net Present V...Get Instant Access to Expert-Tailored Solutions
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Step: 3
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