You Are Considering Two Independent Projects Both of Which Have

question 60

Multiple Choice

You are considering two independent projects both of which have been assigned a discount rate of 8% .Based on the profitability index,what is your recommendation concerning these projects?
$$\begin{array} { | l | l | l | } \hline \text { Year } & \text { Project A } & \text { Project } \mathbf { B } \\\hline 0 & \text { -£38,500 } & -£42,000 \\\hline 1 & £20,000 &£ 10,000 \\\hline 2 & £24,000 & £ 40,000 \\\hline\end{array}$$

• A)You should accept both projects since both of their PIs are positive.
• B)You should accept project A since it has the higher PI.
• C)You should accept both projects since both of their PIs are greater than 1.
• D)You should only accept project B since it has the largest PI and the PI exceeds 1.
• E)Neither project is acceptable.

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