California Company is trying to determine the relative profitability of two alternative color laser printers. Printer A

Question:

California Company is trying to determine the relative profitability of two alternative color laser printers. Printer A requires an initial cash outlay of $6,000 and has a net present value of $500. Printer B requires an initial cash outlay of $4,000 and has a net present value of $250. Compute the profitability index of each printer. Which alternative is more profitable?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...