You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y $20,000 $20,000 12,430 7,470 2 5,960 7,470 5,560 7,470 4. 1,920 7,470 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answer to 4 decimal places, e.g. 1.2527.) The PI for project X is and the PI for project Y is Which project, or projects, should be accepted if you have unlimited funds to invest?

You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y $20,000 $20,000 12,430 7,470 2 5,960 7,470 5,560 7,470 4. 1,920 7,470 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answer to 4 decimal places, e.g. 1.2527.) The PI for project X is and the PI for project Y is Which project, or projects, should be accepted if you have unlimited funds to invest?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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