Question
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
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 | minus$1 comma 900 comma 0001,900,000 | minus$2 comma 500 comma 0002,500,000 | |||
Year 1 | $475 comma 000475,000 | $1 comma 250 comma 0001,250,000 | |||
Year 2 | $475 comma 000475,000 | $1 comma 000 comma 0001,000,000 | |||
Year 3 | $475 comma 000475,000 | $750 comma 000750,000 | |||
Year 4 | $475 comma 000475,000 | $500 comma 000500,000 | |||
Year 5 | $475 comma 000475,000 | $250 comma 000250,000 | |||
Discount rate | 7% | 14% |
What is the PI of project U?
nothing
(Round to two decimal places.)
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