Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It...

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Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the follow

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Answer 1

Answer #1

a. The profitability index for the projects are,

A = NPV/ use of facility

=$2.01/ 100%

= 2.01

B = $0.98/ 0.54

=1.81

C = $1.48/ 0.46

= 3.2174

= 3.22

Fabulous fabricators should allocate wealth towards the project B and C , together they have a NPV of $2.46 which is higher than A , both projects B and C have the highest profitability as well.

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Answer 2

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