Solution-Select using the the profitability index

Select using the the profitability index

Reference no: EM132375668

You have a $1 million capital budget and must make the decision about which investments your firm should undertake for the coming year. There are three projects available and the cash flows of each project appear below. Assume a cost of capital of 12%. Which project do you select using the the profitability index, and what is its PI? (Show your work. Two decimal places required. Highlight or bold your answer.)

Cash Flow Project 1 Project 2 Project 3

Year 0 -400,000 -500,000 -1,000,000

Year 1 175,000 300,000 500,000

Year 2 275,000 350,000 700,000

Year 3 275,000 350,000 700,000

Reference no: EM132375668

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Select using the the profitability index

Reference no: EM132375668

Reference no: EM132375668

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