Amount of funds to pay for investment project


Profitability Index versus NPV. Consider these two projects:

Project C0 C1 C2 C3
A -$36 +$20 +$20 +$20
B - 50 + 25 + 25 + 25

Q1. Which project has the highest NPV if the discount rare is 10%?

Q2. Which has the higher profitability index?

Q3. Which project is most attractive to a firm that can raise a unlimited amount of funds to pay for investment project?

Q4. Which project is most attract to a firm that limited in the funds it can raise?

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Finance Basics: Amount of funds to pay for investment project
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