Homework Answers
PI = NPV / Initial Investment
Project I's PI = $10.1 million / $10 million = 1.01
Project II's PI = $19 million / $15 million = 1.27
Project III's PI = $22 million / $15 million = 1.47
Project IV's PI = $25 million / $20 million = 1.25
Project V's PI = $60.2 million / $30 million = 2.01
The PI rule selects Projects V, III, II. These are also the optimal projects to undertake (as the budget is used up fully taking the projects in order).
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