Question
The treasurer of Amaro Canned Fruits has projected the cash flows of projects A, B and C as follows: Year Project A () Project B
The treasurer of Amaro Canned Fruits has projected the cash flows of projects A, B and C as follows:
Year | Project A () | Project B () | Project C () |
0 | -100000 | -200000 | -100000 |
1 | 70000 | 130000 | 75000 |
2 | 70000 | 130000 | 60000 |
Suppose the relevant discount rate is 12% a year.
a. Compute the PI for each of the three projects.
b. Compute the NPV for each of the three projects.
c. Suppose these projects are independent. Which project(s) should Amaro accept based on the PI rule?
d. Suppose these projects are mutually exclusive. Which project(s) should Amaro accept, based on the PI rule?
e. Suppose Amaros budget for these projects is 300000. The projects are not divisible. Which project(s) should Amaro accept?
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International Finance Transactions Policy And Regulation
Authors: Hal Scott, Anna Gelpern
21st Edition
1634602048, 978-1634602044
