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Important information about Profitability Index versus NPV.

Consider these two projects

Project A: C0= -$36, C1= +$20, C2= +$20, C3= +$20

Project B: C0= -$50, C1= +$25, C2= +$25, C3= +$25

a.Which project has the higher NVP if the discount rate is 10%?
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?

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Profitability Index Versus NPV.
Consider these two projects

Project A: C0= -$36, C1= +$20, C2= +$20, C3= +$20

Project B: C0= -$50, C1= +$25, C2= +$25, C3= +$25

a. Which project has the higher NVP if the discount rate is 10%?

NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted at the project's cost of ...

Solution Summary

This solution is comprised of a detailed explanation to answer which project has higher NPV and profitability index and which project is most attractive to invest.

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