Homework Answers
profitability index = present value of future cash flows/initial investment
therefore,
| Project | profitability index | rank |
|---|---|---|
| A | 1.2 | 4 |
| B | 1.5 | 2 |
| C | 1.4 | 3 |
| D | 2.26 | 1 |
note: the project with higher profitability index is preferred.
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