Webley Corp. is considering two expansion options, but does not have enouogh cap

Question

Webley Corp. is considering two expansion options, but does not have enouogh 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: A. Choose W because it has a higher profitability index. B. choose D because it has a lower profitability index. C. Choose W because it has a higher profitability index. D. Choose D because it has a higher profitability index.

Explanation / Answer

C. Choose W because it has a higher profitability index.

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