The Project Cash Flows and Profitability Indexes for Projects a and B

question 52

Multiple Choice

The project cash flows and Profitability Indexes for Projects A and B are provided in the table below. If the two projects are not mutually exclusive and there are no capital constraints, which project(s) should you select? $$\begin{array} { | c | c | c | } \hline & \text { Project A } & \text { Project B } \\\hline \text { Year 0 } & - \$ 1,900 & - \$ 2,000 \\\hline \text { Year 1 } & \$ 2,500 & \$ 1,550 \\\hline \text { Year 2 } & \$ 1,500 & \$ 1,900 \\\hline \text { PI } & 1.7411 & 1.3923 \\\hline\end{array}$$

• A)Project A
• B)Project B
• C)Either Project A or Project B
• D)Both Projects

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Definitions:

Probability

A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Poisson Random Variable

A type of discrete random variable that expresses the probability of a given number of events occurring in a fixed interval of time or space.

Poisson Probabilities

Probabilities calculated under the assumption of a Poisson distribution, typically used to model the number of times an event occurs in a fixed interval of time or space.

Calculate

To determine something mathematically, often by using a specific formula or procedure.