You are analyzing two proposed capital investments with the following cash flows: Year 0 1 2 3 Project X - $20,000 12,830 5,560 5,560 2,020 Project Y - $20,000 The PI for project X is 7,070 7,070 7,070 7,070 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to 4 decimal places, e.g. 1.2527.) Which project, or projects, should be accepted if you have unlimited funds to invest? If you have unlimited funds you should invest in and the PI for project Y is Which project should be accepted if they are mutually exclusive? If they are mutually exclusive you should invest in

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
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You are analyzing two proposed capital investments with the following cash flows:
Year
0
1
2
3
4
Project X
- $20,000
12,830
5,560
5,560
2,020
Project Y
- $20,000
The Pl for project X
7,070
7,070
7,070
7,070
The cost of capital for both projects is 10 percent.
Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places,
e.g. 15.25 and final answers to 4 decimal places, e.g. 1.2527.)
Which project, or projects, should be accepted if you have unlimited funds to invest?
If you have unlimited funds you should invest in
and the PI for project Y is
Which project should be accepted if they are mutually exclusive?
If they are mutually exclusive you should invest in
Transcribed Image Text:You are analyzing two proposed capital investments with the following cash flows: Year 0 1 2 3 4 Project X - $20,000 12,830 5,560 5,560 2,020 Project Y - $20,000 The Pl for project X 7,070 7,070 7,070 7,070 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to 4 decimal places, e.g. 1.2527.) Which project, or projects, should be accepted if you have unlimited funds to invest? If you have unlimited funds you should invest in and the PI for project Y is Which project should be accepted if they are mutually exclusive? If they are mutually exclusive you should invest in
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