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The treasurer of Amaro Canned Fruits Inc. has projected the cash flows of projects A, B, and C as follows: Year Project A Project B

The treasurer of Amaro Canned Fruits Inc. has projected the cash flows of projects A, B, and C as follows:

Year Project A Project B Project C
0 $ 170,000 $ 320,000 $ 170,000
1 114,000 208,000 129,000
2 114,000 208,000 94,000

Suppose the relevant discount rate is 12 percent a year.

a. Compute the PI for each of the three projects. (Do not round intermediate calculations. Round the answers to 2 decimal places.)

Profitability Index
Project A
Project B
Project C

b. Compute the NPV for each of the three projects. (Do not round intermediate calculations. Round the answers to 2 decimal places. Omit $ sign in your response.)

NPV
Project A $
Project B $
Project C $

c. Suppose these three projects are independent. Which project(s) should Amaro accept based on the PI rule?

multiple choice 1

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project A, Project B

  • Project A, Project C

  • Project B, Project C

d. Suppose these three projects are mutually exclusive. Which project(s) should Amaro accept based on the PI rule?

multiple choice 2

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project A, Project B

  • Project A, Project C

  • Project B, Project C

e. Suppose Amaros budget for these projects is $490,000. The projects are not divisible. Which project(s) should Amaro accept?

multiple choice 3

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project B, Project C

  • Project B, Project A

  • Project A, Project C

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