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Calculate the Profitability Index for each project

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Reference no: EM132620531

Question - Suppose you are analyzing two proposed projects that have Br. 1,062,500 (Project A) and Br. 637,500 (Project B) initial investments with the following expected cash flows:

Year Project A Project B

1 Br. 340,000 Br. 212,500

2 425,000 212,500

3 637,500 425,000

Required -

(a) Calculate the net present values (NPVs) for each project, assuming the firm's WACC is 10%.

(b) Calculate the Profitability Index for each project.

(c) Which project(s) should be adopted if the projects are independent each other?

(d) Which project should be adopted if the projects are mutually exclusive ones?

Reference no: EM132620531

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