Profitability index. Given the discount rate and the future cash flow of each project listed in...

Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept. Cash Flow Project U Project V Year 0 -$1,800, 000 -$2, 400,000 Year 1 $450,000 $1, 200,000 Year 2 $450,000 $1,000,000 Year 3 $450,000 $800, 000 Year 4 $450, 000 $600,000 Year 5 $450,000 $400,000 Discount rate 7% 12%

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Expert Solution

Calculate the profitability index as follows:

Profitability index of Project V is greater than Project U. Select Project V.

Formulas:

jeff jeffy answered 1 year ago

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