Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...
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Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Lithium, Inc.'s required rate of return for these projects is 10%. The profitability index for Project A is
Select one:
a. 1.27
b. 1.12
c. 1.22
d. 1.17
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