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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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    https://brainmass.com/business/capital-budgeting/net-present-value-and-profitability-index-162721

    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

    $2.19

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