Profitability index
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Zellars, Inc. Is considering two projects.
Project A costs $75,000 and is expected to generate $48,000 in year one and $45,000 in year two.
Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four.
Zellars, Inc.'s required rate of return for these projects is 10%. The profitability index for Project A is?
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Solution Summary
The solution explains how to calculate the profitability index for a project.
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Profitability Index = PV of cash flows/Initial Investment
For Project ...
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