Question
You are a manager with an investment budget of $8 million. You may invest in the following projects. Investment and cash-flow figures are in millions
You are a manager with an investment budget of $8 million. You may invest in the following projects. Investment and cash-flow figures are in millions of dollars.
| Project | Discount Rate, % | Investment | Annual Cash Flow | Project Life, Years |
| A | 10 | 3 | 1 | 5 |
| B | 12 | 4 | 1 | 8 |
| C | 8 | 5 | 2 | 4 |
| D | 8 | 3 | 1.5 | 3 |
| E | 12 | 3 | 1 | 6 |
a. Why might these projects have different discount rates?
b-1. Find the profitability index of each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2. Which projects should the manager choose?
c. Which projects will be chosen if there is no capital rationing?
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Core Concepts Of Accounting Information Systems
Authors: Nancy A. Bagranoff, Mark G. Simkin, Carolyn Strand Norman
11th Edition
9780470507025, 0470507020
