How do they compare, and what meaning can you discern from that? What kinds of constraints occur in your department, business, or industry that requires making choices between otherwise viable projects or investments?

Calculation of NPV and IRR and MIRR and Profitability Index

Big Red Trucking must make a choice between two good alternatives because they have insufficient funds to pursue both. How can the profitability index help Big Red? What will it tell them? Find the profitability indexes for these projects. How do they compare, and what meaning can you discern from that? What kinds of constraints occur in your department, business, or industry that requires making choices between otherwise viable projects or investments? How do decisions in your organization use present value calculations and future cash flow projections? Besides future cash flows, what other financial criteria would you consider in making your decision between two or more alternatives? What non-financial criteria would impact your decision?

 

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