#8 Calculating Profitability Index Suppose the following two independent investm

Question

#8 Calculating Profitability Index Suppose the following two independent investment opportunities are available to Greenplain, Inc. The appropriate discount rate is 10 percent. Year 0 is -$2300 Project Alpha and -$3,900 is Project Beta Year 1 is $1200 and $800 is Project Beta Year 2 is #1100 Project Alpha and $2300 is Project Beta Year 3 is $900 Project Alpha and $2900 is Project Beta. a. Compute the profitability index for each of the 2 projects b. Which project(s) should be Greenplain accept based on the profitability index rule?

Explanation / Answer

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