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Courtesy Caravan, Inc. may invest in only one of three new projects. Due to other capital...

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Finance

Courtesy Caravan, Inc. may invest in only one of three newprojects. Due to other capital constraints, they have decided tobase their decision on each project’s profitability index. Thecompany has a cost of capital of 9.0%. Cash Flows (millions) Year 0Year 1 Year 2 Year 3 Year 4 Project A (280 ) 100 130 150 200Project B (300 ) 130 150 180 190 Project C (380 ) 160 180 200260

a. What is the profitability index for each project? (Round youranswers to four decimal places.)

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3.8 Ratings (452 Votes)
PROJECT A Year Project i DF 9 ii PV of Project A i ii 0 100 1000 10000 1 130 0917 11927 2 150 0842 12625 3 200 0772 15444 PV 49995 Total of PV of Cash Inflows 49995    See Answer
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Courtesy Caravan, Inc. may invest in only one of three newprojects. Due to other capital constraints, they have decided tobase their decision on each project’s profitability index. Thecompany has a cost of capital of 9.0%. Cash Flows (millions) Year 0Year 1 Year 2 Year 3 Year 4 Project A (280 ) 100 130 150 200Project B (300 ) 130 150 180 190 Project C (380 ) 160 180 200260a. What is the profitability index for each project? (Round youranswers to four decimal places.)

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