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		$	160,000		$	310,000		$	160,000
1			112,000			204,000			122,000
2			112,000			204,000			92,000

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	$

c. Suppose these three projects are independent. Which project(s) should Amaro accept based on the profitability index rule?

	Project A
	Project B
	Project C
	Project A, Project B, Project C
	Project A, Project B
	Project A, Project C
	Project B, Project C

d. Suppose these three projects are mutually exclusive. Which project(s) should Amaro accept based on the profitability index rule?

	Project B
	Project A
	Project C
	Project A, Project B
	Project A, Project B, Project C
	Project A, Project C
	Project B, Project C

e. Suppose Amaros budget for these projects is $470,000. The projects are not divisible. Which project(s) should Amaro accept?

	Project A
	Project B
	Project C
	Project A, Project B, Project C
	Project B, Project C
	Project B, Project A
	Project A, Project C