Question: 5. Project Selection with Resource Constraints - Evaluation of Projects with Different Resource Constraints Considerthree possible projects with a $100 million budget constraint. Table 1.

5. Project Selection with Resource Constraints - Evaluation of Projects with Different Resource Constraints Considerthree possible projects with a $100 million budget constraint. Table 1. Possible Projects for a $100 Million Budget 160 11 1.4 1.2 MMPA 504 Profitability Index The profitability index can be used to identify the optimal combination of projects to undertake. Profitability Index = Value Created NPV Resource Consumed Resource Consumed . From Table 1, we can see it is better to take projects II & III together and forgo project I. MMPA 504 Example 3 Problem Suppose your firm has the following five positive NPV projects to choose from. However, there is not enough manufacturing space in your plant to select all of the projects. Use profitability index to choose among the projects, given that you only have 100,000 square feet of unused space

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