Calculate profitability index of project, Basic Statistics

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Your division has been allocated $15M for capital projects for the coming year. You've been able to identify five potential projects, as outlined in the table below, each of which will last 10 years.

Project Name	Initial Cost	Annual Cash Flows	Discount Rate
Alpha	8M	2M	6%
Bravo	7.5M	2.25M	9%
Charlie	4M	0.75M	3%
Delta	5M	0.6M	4%
Echo	2M	0.5M	10%

a. Show the profitability index of each project.

b. Which project(s) should the firm undertake?

c. Which project(s) would the firm undertake if capital is not rationed?

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