Project November Requires an Initial Investment of $500,000

question 96

Essay

Project November requires an initial investment of $500,000. The present value of operating cash flows is $550,000. Project December requires an initial investment of $750,000. The present value of operating cash flows is $810,000.
a. Compute the profitability index for each project.
b. If the the projects are mutually exclusive, does the profitability index rank them correctly?

---

Definitions:

Glocalization

The practice of conducting business according to both local and global considerations, adapting services or products for local markets while maintaining global appeal.

Unidirectional Flow

A transmission mode where signals or data travel in a single direction from origin to destination, without feedback or interaction from the receiver.

Periphery

Often relates to the outer limits or edge of an area or object, but in business or economics, it can refer to markets or activities that are not the primary focus of a company's operations.

Affluent Centre

A term referring to areas or regions marked by high income and wealth, often focused on in marketing for their purchasing power.