Columbus Retail Enterprises is evaluating the two investment proposals given below:
Investment Proposal
A B
- Investment required $(250,000) $(180,000)
- Present value of cash inflows 300,000 220,000
- Net present value $50,000 $40,000
- Life of the project 5years 5 years
Ignore the impact of income taxes in your calculation.Based on project profitability index for each investment proposal, which investment proposal should be undertaken and what is its project profitability index?