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Finance Equations

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Can you please breakdown a solution as to how to solve this equation with the correct answers to each portion.

Profitability Index versus NPV. Consider these two projects:

Project c0 c1 c2 c3
A -$36 +$20 +$20 +$20
B -50 +25 +20 +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?
ould like a full break down of how you came up with the answer.

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Solution Summary

The solution breaks down a solution that solves the given equation with the correct answers to each portion (see the attachment for further details).

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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