Problem 1: California company is trying to determine the relative profitability of two alternative investments. Investment A requires an initial cash outlay of $10,000 and has a net present value of $500. Investment B requires an initial cash outlay of $2,000 and has a net present value of $150. Compute the profitability index of each investment. Which alternative is more profitable?
Problem 2: The company is considering eight capital investment projects. The company has a minimum required internal rate of return of 13% Screen and rank the eight capital investment projects using the internal rate of return.
Project Exspected date of return
S 14%
T 24
U 20
V 10
W 17
X 9
Y 12
Z 18