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Pofitability index for two projects

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Consider the following projects:

Project A: C0: -2100 C1: +2100 C2: +1200
Project B: Co: -2100 C1: +1440 C2: +1728

a. Calculate the profitability index for A and B assuming a 22 percent opp. 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.

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Solution Summary

The solution calculates profitability index for two projects A and B assuming a 22 percent opportunity cost of capital

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