Reference no: EM131085619
Juan is considering two independent projects. Project A costs $74,600 and cash flows of $18,700, $46,300, and $12,200 for Years 1 to 3, respectively. Project B costs $70,000 and has cash flows of $10,600, $15,800, and $67,900 for Years 1 to 3, respectively. Juan assigns a discount rate of 10 percent to Project A and 12 percent to Project B. Which project or projects, if either, should he accept based on the profitability index rule? Answer options: 1. accept both projects 2. accept Project A and reject Project B. 3. accept either A or B, but not both 4. reject both projects 5. accept Project B and reject Project A
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