Mutually exclusive projects available to global investments

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Reference no: EM13333886

Consider the following two mutually exclusive projects available to Global Investments Inc.

Czero Cone Ctwo PI NPV

A -$1,000 $1,000 $500 1.32 $322

B -500 500 400 1.57 285

The appropiate discount rate of the projects is 10 percent. Global Investments chose to undertake project A. At a luncheon for shareholders, the manager of a pension fund that owns a substantial amount of the firm's stock asks you why the firm chose project A instead of project B when project B has a higher profitability index. How would you, the CFO, justify your firms's action? Are there any circumstances under which Global Investments should choose project B?

Reference no: EM13333886

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