Webley Corp.is considering two expansion options,but does not have enough capital to undertake both,Project W requires an investment of $100,000 and has an NPV of $10,000.Project D requires an investment of $80,000 and has an NPV of $8,200.If Webley use the profitability index to decide,it should:

Question

Quizplus · Accepted Answer

The profitability index is calculated as NPV divided by the investment. For Project W, it is $10,000/$100,000 = 0.1. For Project D, it is $8,200/$80,000 = 0.1025. Project D has a higher profitability index.