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St. Michaels School ranks investments by using the profitability index (PI). The following data relate to Project X and Project Y: Project X Project Y

St. Michaels School ranks investments by using the profitability index (PI). The following data relate to Project X and Project Y:

Project X Project Y
Initial Investment $ 400,000 $ 1,300,000
Present value of inflows 600,000 1,800,000

Which project would be more attractive as judged by its ranking, and why?

a.)Project X because the PI is 1.50.

b.)Project Y because the PI is 1.38.

c.)Project X because the PI is 0.67.

d.)Project Y because the PI is 0.72.

e.)Both projects would be equally attractive in terms of ranking, as indicated by a positive PI.

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