Question

Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: Contract NPV $1.95 million $1.01 million $1.45 million Use of Facility 100% 52% 48% a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? a. What are the profitability indexes of the projects? The profitability index for contract Ais (Round to two decimal places.) The profitability index for contract Bis (Round to two decimal places.) The profitability index for contract Cis (Round to two decimal places.) b. What should Fabulous Fabricators do? (Select the best choice below.) O A. It should take the two projects with the highest profitability indexes: C and A OB. Since it has the capacity to do both B and C and NPV + NPV is greater than NPVA, it should do both B and C. OC. Since the NPV of A is the largest, it should choose A .O D. Since the profitability index for C is the largest, it should choose C.

Answer 1

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? v . 01:07 ENG 24-02-202024 X OL107 OF X OG fix OH O O OK O L OM ON oo OP OQ OR os Ot ca Q CONTRACTS NPV USE OF FACILITY 1.95 100% 1.01 52% 1.45 48% [P/Q] PROFITABILITY INDEX 1.95 1.94 3.02 C PROFITABILITY INDEX FOR A FOR B FORC 1.95 1.94 3.02 OPTION B BOTH B AND C SINCE IT HAS CAPACITY TO DO BOTH PROJECT B & C AND NPV(B) + NPV(C) IS GREATER THAN NPV(A) IT SHOULD DO BOTH B & C 108 109 110 IRRnpvbeta RATIO PI PBP ARR invest, EAA Mi-np-ir REPLACEMENTS HPR GMAM EAC MACRS RELEVANT NPV BETA LEVERED REPLACEMENT BONC... ►