1. Consider two mutually exclusive investment projects: A 1 and A2. Each project has the same service life, and the present worth of each component value (B, I, and C) is computed at 10% as follows: Project Al: B=$8000, I-$3500, C-$2000 and Project A2: B-$18000, I-$11,000, C-$4000 Which project would be the best alternative based on PI index?

1. Consider two mutually exclusive investment projects: A 1 and A2. Each project has the same service life, and the present worth of each component value (B, I, and C) is computed at 10% as follows: Project Al: B=$8000, I-$3500, C-$2000 and Project A2: B-$18000, I-$11,000, C-$4000 Which project would be the best alternative based on PI index?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5MC

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