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?

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Definitions:

Gossip

Informal and often unverified conversation or reports about other people, typically involving details that are not confirmed as being true.

Cooperative

Pertaining to the willingness to act together with others for a common purpose or benefit.

Selfish

Concerned excessively or exclusively with oneself, often at the expense of others.

Crowded Street Corner

A specific location where a large number of people gather or pass, often leading to a congested space.