Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Problem 8-23 Profitability Index (LO3)
Consider the following projects:
Project
A
Co
-$ 3,000
B
-3,000
C₁
+$ 2,900
+2,340
C2
+$ 2,100
+1,908
a. Calculate the profitability index for A and B assuming a 24% opportunity cost of capital.
Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Answer is complete but not entirely correct.
Profitability
index
Project
A
1.2348 X
B
1.0427 X
b. According to the profitability index rule, which project(s) should you accept?
Project A
Project B
O Both ☑
Neither
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Transcribed Image Text:Problem 8-23 Profitability Index (LO3) Consider the following projects: Project A Co -$ 3,000 B -3,000 C₁ +$ 2,900 +2,340 C2 +$ 2,100 +1,908 a. Calculate the profitability index for A and B assuming a 24% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Profitability index Project A 1.2348 X B 1.0427 X b. According to the profitability index rule, which project(s) should you accept? Project A Project B O Both ☑ Neither
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