Calculating the Highest Returns from Potential Projects


Your division has been allocated $15M for capital projects for the coming year.  You`ve been able to identify five potential projects, as outlined in the table below, each of which will last 10 years.

Project Name   Initial Cost    Annual Cash Flows      Discount Rate

Alpha                          8M                    2M                               6%

Bravo                          7.5M                2.25M                          9%

Charlie                         4M                  0.75M                         3%

Delta                           5M                   0.6M                             4%

Echo                            2M                   0.5M                           10%


a.Show the profitability index of each project.

b.Which project(s) should the firm undertake?

c.Which project(s) would the firm undertake if capital is not rationed?



The question belongs to Finance and it is about calculating which project should the business take up amongst the 5 projects. The initial cost, the annual cash flows and discount rates have been given. You need to calculate and tell which project has the highest returns or highest profitability index for a period of 10 years.

Download Full Solution


  • HWA

    this is a very good website

  • HWA

    I have 50 questions for the same test your page is showing only 28

  • HWA

    hi can you please help or guide me to answer my assignments. thanks

  • HWA

    hi can anyone help or guide me to my assignments. thanks

  • HWA

  • HWA

    This solution is perfect ...thanks

  • HWA

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA

    Perfect bank of solution. 

  • HWA

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA

    works fine.