Reference no: EM132792984

Rudolph Ltd. is deciding between 2 investment options. Rudolph uses an 12% discount rate, the data relevant to the two investments are as follows:

                                                  Investment A                Investment B
Investment required                   $40,000                      $30,000
Annual cash inflows                         9,000                        0
Cash inflow at the end of project        0                        $120,000
Life of the project                            10 years                   10 years

Required:

Problem 1 : Based on NPV which investment would you recommend Rudolph accept?

Problem 2 : Given that the investments are different, utilize the profitability index. Has your recommendation changed? Explain.