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Question: the treasurer of tropical fruits inc has projected the cash...

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The treasurer of Tropical Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows:

Year Project A Project B Project C
0 −$ 215,000 −$ 380,000 −$ 215,000
1 138,000 232,000 152,000
2 138,000 232,000 118,000


Suppose the relevant discount rate is 9 percent per year.

a. Compute the profitability index for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Profitability
index
Project A
Project B
Project C


b. Compute the NPV for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV
Project A $
Project B $
Project C $


c. Suppose these three projects are independent. Which project(s) should the company accept based on the profitability index rule?

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project A, Project B

  • Project A, Project C

  • Project B, Project C


d. Suppose these three projects are mutually exclusive. Which project(s) should the company accept based on the profitability index rule?

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project A, Project B

  • Project A, Project C

  • Project B, Project C


e. Suppose the budget for these projects is $595,000. The projects are not divisible. Which project(s) should be accepted?

  • Project A

  • Project B

  • Project C

  • Project A, Project B, Project C

  • Project B, Project C

  • Project B, Project A

  • Project A, Project C

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