Consider the following projects: Cash Flows ($) Co -11,900 -21,900 Assume that the projects are mutually...

 

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Consider the following projects: Cash Flows ($) Co -11,900 -21,900 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 8%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose? Project D G₁₂ 23,800 38,325 Consider the following projects: Cash Flows ($) Co -11,900 -21,900 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 8%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose? Project D G₁₂ 23,800 38,325

Answer rating: 100% (QA)

To calculate the profitability index we need to divide the present value of the cash flows by the initial investment for each project The present valu... View the full answer