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    Important Information About Profitability Index

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    Consider the following projects:

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

    a. Calculate the profitability index for A and B assuming a 22% opportunity cost of capital
    b. Use the profitability index rule to determine which project(s) you should accept if you could undertake both and if you could undertake only one (which one?)

    © BrainMass Inc. brainmass.com June 3, 2020, 5:56 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/important-information-about-profitability-index-42661

    Solution Summary

    The solution calculates Profitability Index for two projects and determines which project should be accepted if only one can be undertaken.

    $2.19

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