Question

A bank is reviewing two independent credit proposals where unlimited capital is available: • Proposal X: Requires ₹500 Crore outlay ---Yields NPV of ₹50 Crore (PI = 1.10) • Proposal Y: Requires ₹50 Crore outlay ----Yields NPV of ₹20 Crore (PI = 1.40) To maximize absolute economic value, which proposal(s) should be approved?

A Approve only Proposal Y because it has a higher Profitability Index (1.40)
B Approve only Proposal X because it has a higher absolute NPV (₹50 Crore)
C Approve both Proposal X and Proposal Y
D Reject both proposals due to scale mismatch
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