Consider projects A and B with the following cash flows: a-1. What is the NPV of

Question

Consider projects A and B with the following cash flows: a-1. What is the NPV of each project if the discount rate is 10%? a-2. Which project has the higher NPV? Project A Project B b-1 What is the profitability index of each project? b-2. Which project has the higher profitability index? Project A Project B c-1. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? Project A Project B c-2. Which project is most attractive to a firm that is limited in the funds it can raise? Project A Project B Both

Explanation / Answer

Solution:

Project A              22.66 Project B              22.53

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