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Profitability index - Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine
Profitability index - 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.
Cash Flow | Project U | Project V |
| ||
Year 0 | (negative)-$2,000,000 | (negative)-$2,600,000 | |||
Year 1 | $500,000 | $1,300,000 | |||
Year 2 | $500,000 | $1,100,000 | |||
Year 3 | $500,000 | $900,000 | |||
Year 4 | $500,000 | $700,000 | |||
Year 5 | $500,000 | $500,000 | |||
Discount rate | 6% | 12% |
What is the PI of Project U? Project V?
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