Investment alternatives

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Reference no: EM131013727

A company faces the following investment alternatives

Project          Capital Investment.         Cash Flows from Investment

I.                      $7 million.                        $1.2 million per year in perpetuity

II.                     $12 million.                      $1.5 million per year in perpetuity

III.                     $16 million.                     $2.2 million per year in perpetuity

IV.                    $10 million.                      $1.4 million per year in perpetuity

V.                     $11 million.                      $1.6 million per year in perpetuity

If the company's budget is $30 million, use the profitability index to determine the best combination of investments, given a cost of capital of 5 percent.

Reference no: EM131013727

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