Suppose the following two independent investment opportunities are available to Greenplain, Inc. The appropriate discount rate is 10 percent.
Year Project Alpha Project Beta
0 -$1,500 -$2,500
1 800 500
2 900 1,900
3 700 2,100
a. Compute the profitability index for each of the two projects.
b. Which project(s) should Greenplain accept based on the profitability index rule?