The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of Projects A, B, and

Question:

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

Suppose the relevant discount rate is 12 percent per year.
a. Compute the profitability index for each of the three projects.
b. Compute the NPV for each of the three projects.
c. Suppose these three projects are independent. Which project(s) should Amaro accept based on the profitability index rule?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...