Project A Project B Project C Year 1: 15 000 Year 1: 13 000 Year 1: 10 000 Year 2: 20 000 Year 2: 11 000 Year 2: 9 000 Year 3: 12 000 Year 3: 14 000 Year 3: 15 000 Year 4: 10 000 Year 4: 21 000 Year 4: 14 000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A firm in New York  has USD 40 000 to invest in three projects, either Project A or Project B
or Project C. Each project runs over four years. The expected cash inflows at the end of each
year are displayed in the table

The required rate of return (discount rate) is 10% p.a.
What conclusions can you draw? Are the projects equally profitable? Use the profitability index
(PI).

Project A
Project B
Project C
Year 1: 15 000 Year 1: 13 000 Year 1: 10 000
Year 2: 20 000 Year 2: 11 000 Year 2: 9 000
Year 3: 12 000 Year 3: 14 000 Year 3: 15 000
Year 4: 10 000 Year 4: 21 000 Year 4: 14 000
Transcribed Image Text:Project A Project B Project C Year 1: 15 000 Year 1: 13 000 Year 1: 10 000 Year 2: 20 000 Year 2: 11 000 Year 2: 9 000 Year 3: 12 000 Year 3: 14 000 Year 3: 15 000 Year 4: 10 000 Year 4: 21 000 Year 4: 14 000
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