Compute the profitability index for each of the two projects

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Reference no: EM132007222

Suppose the following two independent investment opportunities are available to Relax. Inc. The appropriate discount rate is 12 percent.

Year

Project Alpha

Project Beta

0

-$4.300

-$5.900

1

2.200

1,300

2

2.100

4,300

3

1.400

3,900

a. Compute the profitability index for each of the two projects.

b. Which project should the company accept based on the profitability index rule?

Project Alpha

Project Beta

Reference no: EM132007222

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