Question

Suppose the following two independent investment opportunities are available to Greene, Inc. The appropriate discount rate...

Suppose the following two independent investment opportunities are available to Greene, Inc. The appropriate discount rate is 12 percent.

Year Project Alpha Project Beta
0 ?$ 5,300 ?$ 6,900
1 2,700 1,550
2 2,600 5,300
3 1,650 4,400

a. Compute the profitability index for each of the two projects.

Profitability Index
Project Alpha   

Project Beta

b. Which project(s) should the company accept based on the profitability index rule?

-Project Beta

-Project Alpha

-Neither project

-Both projects

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