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In: Finance

You are a project manager evaluating the following three projects               Year                Project A &

  1. You are a project manager evaluating the following three projects

              Year                Project A                       Project B                       Project C

              0                     -$150,000                      -$300,000                      -$150,000

              1                     $110,000                       $200,000                       $120,000

              2                     $110,000                       $200,000                       $90,000

The relevant discount rate ( r ) is 12% a year

Calculate the PI for each of the three projects.

  1. Calculate the NPV for each of the three projects.
  2. If the projects were independent, and according to the PI rule, which project(s) would you choose?
  3. If the projects were mutually exclusive, what project(s) would you choose according to the PI rule? Justify your answer, by using the incremental argument or otherwise. (please full explain)
  4. If the budget of the company is $450,000, and the projects are indivisible, which project(s) would you choose?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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