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Calculation of the profitability index

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Profitability Index. Consider the following projects:

Project C0 C1 C2
A -$2,100 +$2,000 +$1,200
B - 2,100 + 1,440 + 1,728

Calculate the profitability index for A and B assuming a 22 percent opportunity cost of capital.

b. Use the profitability index rule to determine which project(s) you should accept (i) if you could undertake both and (ii) if you could undertake only one.

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This explains the steps to calculate the profitability index

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Profitability Index. Consider the following projects:

Project C0 C1 C2
A -$2,100 +$2,000 +$1,200
B ...

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