Question
Problem 5-17 Comparing Investment Criteria The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B, and C as follows:
Problem 5-17 Comparing Investment Criteria
| The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B, and C as follows: |
| Year | Project A | Project B | Project C | ||||||
| 0 | $ | 185,000 | $ | 335,000 | $ | 185,000 | |||
| 1 | 117,000 | 214,000 | 127,000 | ||||||
| 2 | 117,000 | 214,000 | 97,000 | ||||||
| Suppose the relevant discount rate is 10 percent per year. |
| a. | Compute the profitability index for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) |
| Profitability index | |
| Project A | |
| Project B | |
| Project C | |
| b. | Compute the NPV for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| Project A | $ |
| Project B | $ |
| Project C | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To solve the problem effectively follow these steps to calculate the Profitability Index PI and Net Present Value NPV for projects A B and C Step 1 Un...
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Step: 2
Step: 3
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Short Term Financial Management
Authors: Ned C Hill
1st Edition
0023548207, 978-0023548208
