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Calculate the profitability index for each project

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For questions one through four, consider the following two projects. Assume they are not mutually exclusive projects, which means that you could possibly invest in both. Regardless of the decision rule used, your required rate of return for both of these projects is 15%.

Year Project A Cash Flows Project B Cash Flows
0 -$350,000 -$50,000
1 45,000 24,000
2 65,000 22,000
3 65,000 19,500
4 440,000 14,600

What is the profitability index for each project?

PIA is 1.09, PIB is 1.17PIA is 0.91, PIB is 0.85PIA is 1.76, PIB is 1.60PIA is 0.57, PIB is 0.62

Reference no: EM132067424

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