Which project has the higher profitability index

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Consider projects A and B with the following cash flows:

           C0       C1      C2       C3

A    − $ 37    + $ 21    + $ 21   − $ 21

B      − 62        31            31          31

a-1. What is the NPV of each project if the discount rate is 12%?

a-2. Which project has the higher NPV?

b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b-2. Which project has the higher profitability index?

c-1. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects?

c-2. Which project is most attractive to a firm that is limited in the funds it can raise?

Reference no: EM131859574

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