Ten-East Corp. is considering two expansion options, but does not have enough capital to undertake both. Project A requires an investment of 200,000 dollars and has an NPV of 20,000. Project E requires an investment of 160,000 dollars and has an NPV of 16,400. If Ten-East uses the profitability index to decide, it should: Select one: A. Choose E because it has a higher profitability index. B. Choose A because it has a higher profitability index. C. Choose E because it has a lower profitability index. D. Choose A because it has a lower profitability index.
Ten-East Corp. is considering two expansion options, but does not have enough capital to undertake both. Project A requires an investment of 200,000 dollars and has an NPV of 20,000. Project E requires an investment of 160,000 dollars and has an NPV of 16,400. If Ten-East uses the profitability index to decide, it should: Select one: A. Choose E because it has a higher profitability index. B. Choose A because it has a higher profitability index. C. Choose E because it has a lower profitability index. D. Choose A because it has a lower profitability index.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Ten-East Corp. is considering two expansion options, but does not have enough capital to undertake both. Project A requires an investment of 200,000 dollars and has an NPV of 20,000. Project E requires an investment of 160,000 dollars and has an NPV of 16,400. If Ten-East uses the profitability index to decide, it should:
Select one:
A. Choose E because it has a higher profitability index.
B. Choose A because it has a higher profitability index.
C. Choose E because it has a lower profitability index.
D. Choose A because it has a lower profitability index.
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