Salalah Methanol company management is considering three competing investment Projects A,B &C

 

                        

Year	Project A	Project B	Project C
Initial Investment	10000	10000	10000
1	1100	4160	6225
2	3100	5260	8250
3	3800	7360	9275
4	4600	9460	9300
Assume a discount Rate of 5.05%

 

Use the information below and help the management in choosing the most desirable Project using Net Present value and Profitability Index.

 

Solution: Net Present value

 

Formula:

 

Project A

 

Project B

 

Project C

 

Solution: Profitability Index

 

Formula:

 

Project A

 

Project B

 

Project C