The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of proj

Question

The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B, and C as follows:

Compute the profitability index for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Compute the NPV for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Suppose these three projects are independent. Which project(s) should Amaro accept based on the profitability index rule?

Suppose these three projects are mutually exclusive. Which project(s) should Amaro accept based on the profitability index rule?

Suppose Amaros budget for these projects is $535,000. The projects are not divisible. Which project(s) should Amaro accept?

The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B, and C as follows:

Explanation / Answer

1.

2.Calculation of NPV

3.

Accept Project A, B, &C Because all have more than 1 PI

4. Accept Project A because it has higher PI than B&C

5. Accept Project A & B

Total Available Fund =$535000

Cost of A&B= $535000

Year Cashflow (A) Cashflow (B) Cashflow (C) PVF @8% PV(A) PV(B) PV(C) 1 $121,000.00 $220,000.00 $131,000.00 0.925925926 $112,037.04 $203,703.70 $121,296.30 2 $121,000.00 $220,000.00 $101,000.00 0.85733882 $103,738.00 $188,614.54 $86,591.22 Total PV $215,775.03 $392,318.24 $207,887.52 Initial Outflow $185,000.00 $350,000.00 $185,000.00 P I 1.17 1.12 1.12

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.