St. Michaels School ranks investments by using the profitability index (PI). The following data relate to Project X and Project Y:

	Project X				Project Y
Initial Investment	$	400,000			$	1,300,000
Present value of inflows		600,000				1,800,000

Which project would be more attractive as judged by its ranking, and why?

a.) Project X because the PI is 1.50.

b.) Project Y because the PI is 1.38.

c.) Project X because the PI is 0.67.

d.) Project Y because the PI is 0.72.

e.) Both projects would be equally attractive in terms of ranking, as indicated by a positive PI.

Answer rating: 100% (QA)

Profitability Index PV of Cash Inflow Initial Investment Projec... View the full answer