Consider the following two mutually exclusive projects available to Global Investments, Inc.
The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake project A . At a luncheon for shareholders, the manager of a pension fund that owns a substantial amount of the firm’s stock asks you why the firm chose project A instead of project B when project B has a higher profitability index
. How would you, the CFO, justify your firm’s action? Are there any circumstances under which Global Investments should choose project B ?

  • CreatedOctober 01, 2015
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