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The profitability index of 0.40 for project A means that the project earns a net present value of 40 cents for every dollar of initial investment. Based on the profitability index, we should accept projects B, C and G. This combination of projects would exhaust the capital budget of $100,000 while maximizing the net present value of the projects accepted.

Note that this analysis is based on the assumption that the capital constraint is for the current period only and that the initial investments on all these projects will occur in the current period4. It also highlights the cost of the capital rationing constraint for this firm; the net present value of the projects rejected as a consequence of the constraint is $70 million.

Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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