You Are Considering Two Independent Projects Both of Which Have

question 74

Multiple Choice

You are considering two independent projects both of which have been assigned a discount rate of 12 percent.Project A costs $39,100 and produces cash flows of $15,900 a year for 3 years.Project B costs $22,900 and produces cash flows of $14,000 a year for 2 years.Based on the profitability index,what is your recommendation concerning these projects?

• A)Accept both projects
• B)Accept Project B because it has the lower PI
• C)Accept Project A because it has the lower PI
• D)Accept Project A and reject Project B
• E)Reject Project A and accept Project B