Multiple Choice
You are considering two independent projects both of which have been assigned a discount rate of 12 percent.Project A costs $39,100 and produces cash flows of $15,900 a year for 3 years.Project B costs $22,900 and produces cash flows of $14,000 a year for 2 years.Based on the profitability index,what is your recommendation concerning these projects?
A) Accept both projects
B) Accept Project B because it has the lower PI
C) Accept Project A because it has the lower PI
D) Accept Project A and reject Project B
E) Reject Project A and accept Project B
Correct Answer:
Verified
Correct Answer:
Verified
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