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How would you the cfo justify your firms action

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Reference no: EM131369408

Assignment

NPV (Net Present Value) versus PI (Profitability Index)

Projects

C0

C1

C2

PI

NPV

A

-$1000

$1000

$500

1.32

$322

B

-500

500

400

1.57

285

The appropriate discount rate for the projects is 10%. Global Investments chose to undertake project A. At a luncheon for shareholders, the manager of a pension fund that owns a substantial amount of the firm's stock asks you why the firm chose project A instead of project B when project B has a higher PI.

How would you, the CFO, justify your firm's action? Are there any circumstances under which Global Investments should choose project B?

Reference no: EM131369408

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