There are five independent projects that must be evaluated on the basis of the profitability index. (a) Given an investment limit of $35 million and a MARR of 10% per year, select from the projects. (b) Write the spreadsheet function for a project, specifically for project 5, which will correctly display the PI value used to rank the project.
(a) PI1 = 900,000(P/A,10%,7)/4,000,000
= 900,000(4.8684)/4,000,000
= 1.10
PI2 = 1,900,000(P/A,10%,10)/7,000,000
= 1,900,000(6.1446)/7,000,000
= 1.67
PI3 = 2,900,000(P/A,10%,15)/17,000,000
= 2,900,000(7.6061)/17,000,000
= 1.30
PI4 = 3,600,000(P/A,10%,10)/15,000,000
= 3,600,000(6.1446)/15,000,000
= 1.47
PI5 = 5,000,000(P/A,10%,8)/30,000,000
= 5,000,000(5.3349)/30,000,000
= 0.89 (eliminated since PI < 1.0)
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