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Compute the profitability index for the three projects

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The treasurer of Madera Sunnyside Fruit Co. has projected cash flows of projects A, B and C as follows (in $1000).

Year A B C -300 -600 -300 NO 210 400 240 210 400 170 Assume a discount rate of 10 percent.

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

b. Compute the NPV for each of the three projects.

c. Suppose the three projects are independent. Which project(s) should MSF accept based on the profitability index rule?

d. Suppose the three projects are mutually exclusive. Which project should MSF choose based on the profitability index rule? Based on NPV?

e. Suppose MSF has budget for these projects of $600,000. The projects are not divisible. Which project(s) should MSF accept?

Reference no: EM133073063

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