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# Net Present value and Profitability index

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Profitability Index versus NPV. Consider these two projects:

Project C 0 C 1 C 2 C 3
A -\$36 +\$20 +\$20 +\$20
B - 50 + 25 + 25 + 25

A. Which project has the higher NPV if the discount rate is 10 percent?
B. Which has the higher profitability index?
C. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? Which project is most attractive to a firm that is limited in the funds it can raise?

Please help me with answers and WORK to these questions so that I can learn how to perform these problems. Thanks!!

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#### Solution Preview

A. Which project has the higher NPV if the discount rate is 10 percent?

Project A is having higher NPV

B. Which has the higher profitability index?

Project A is having higher PI

C. Which project is most attractive to a firm ...

#### Solution Summary

This explains the steps to compute net present value and profitability index with the help of an example

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