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Suppose you have the following investment opportunities, but only $ 90,000 available for investment. Compute the profitability index for each investment. Which projects should you

  1. Suppose you have the following investment opportunities, but only $ 90,000 available for investment. Compute the profitability index for each investment. Which projects should you accept? Find the profitability index for the optimal portfolio. How much is the lost value because of capital rationing?

Project NPV Investment

1 5,000 10,000

2 5,000 5,000

3 10,000 90,000

  1. 15,000 60,000

5 15,000 75,000

6 3,000 15,000

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