The following are the cash flows of two projects:YearProject AProject B0$ (390)$ (390)1220290222029032202904220 If the opportunity cost of capital is 12%, what is the profitability index for each project?

Identify Initial and Future Cash Flows:Locate the initial investment (negative cash flow in Year 0)…

Answered: The following are the cash flows of two…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section10.6: Profitability Index (pi)

Problem 2ST

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Year	Project A	Project B
0	$ (390)	$ (390)
1	220	290
2	220	290
3	220	290
4	220

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The following are the cash flows of two projects: Year Project A Project B 0 $ (390) $ (390) 1 220 290 2 220 290 3 220 290 4 220 If the opportunity cost of capital is 12%, what is the profitability index for each project?