The treasurer of Tropical Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows: Project A Project B Project C 0 200,000 365,000 200,000 1 129,000 226,000 139,000 2 129,000 226,000 109,000 Suppose the relevant discount rate is 8 percent per year. a. Compute the profitability index for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Profitability index Project A Project B Project C b. Compute the NPV for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Project A $ Project B $ Project C $ c. Suppose these three projects are independent. Which project(s) should the company accept based on the profitability index rule? Project A Project B Project C Project A, Project B, Project C Project A, Project B Project A, Project C Project B, Project C d. Suppose these three projects are mutually exclusive. Which project(s) should the company accept based on the profitability index rule? Project A Project B Project C Project A, Project B, Project C Project A, Project B Project A, Project C Project B, Project C e. Suppose the budget for these projects is $565,000. The projects are not divisible. Which project(s) should be accepted? Project A Project B Project C Project A, Project B, Project C Project B, Project C Project B, Project A Project A, Project C
The treasurer of Tropical Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows: Project A Project B Project C 0 200,000 365,000 200,000 1 129,000 226,000 139,000 2 129,000 226,000 109,000 Suppose the relevant discount rate is 8 percent per year. a. Compute the profitability index for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Profitability index Project A Project B Project C b. Compute the NPV for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Project A $ Project B $ Project C $ c. Suppose these three projects are independent. Which project(s) should the company accept based on the profitability index rule? Project A Project B Project C Project A, Project B, Project C Project A, Project B Project A, Project C Project B, Project C d. Suppose these three projects are mutually exclusive. Which project(s) should the company accept based on the profitability index rule? Project A Project B Project C Project A, Project B, Project C Project A, Project B Project A, Project C Project B, Project C e. Suppose the budget for these projects is $565,000. The projects are not divisible. Which project(s) should be accepted? Project A Project B Project C Project A, Project B, Project C Project B, Project C Project B, Project A Project A, Project C
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
Related questions
Question
The treasurer of Tropical Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows:
| Project A | Project B | Project C | |||||||||
| 0 | 200,000 | 365,000 | 200,000 | ||||||||
| 1 | 129,000 | 226,000 | 139,000 | ||||||||
| 2 | 129,000 | 226,000 | 109,000 | ||||||||
Suppose the relevant discount rate is 8 percent per year.
a. Compute the profitability index for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| Profitability index |
|
| Project A | |
| Project B | |
| Project C | |
b. Compute the
| NPV | |
| Project A | $ |
| Project B | $ |
| Project C | $ |
c. Suppose these three projects are independent. Which project(s) should the company accept based on the profitability index rule?
-
Project A
-
Project B
-
Project C
-
Project A, Project B, Project C
-
Project A, Project B
-
Project A, Project C
-
Project B, Project C
d. Suppose these three projects are mutually exclusive. Which project(s) should the company accept based on the profitability index rule?
-
Project A
-
Project B
-
Project C
-
Project A, Project B, Project C
-
Project A, Project B
-
Project A, Project C
-
Project B, Project C
e. Suppose the budget for these projects is $565,000. The projects are not divisible. Which project(s) should be accepted?
-
Project A
-
Project B
-
Project C
-
Project A, Project B, Project C
-
Project B, Project C
-
Project B, Project A
-
Project A, Project C
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