1. Your company has two projects to consider: a 3-year project X and a 4-year project Y. Cash flows of X and Y are illustrated in the following table, where the unit is million and the negative cash flows in Year 0 show the upfront investments.

Your company only has 100 million for the new investment and the cost of capital is 12%. According to the rule of Profitability Index, which of the following statements is TRUE?

1. You should take Project X.
2. You should take Project Y.
3. You can take both.
4. None of above is correct.

Year X Y 0 -95 -80 1 45 38 2 58 35 3 62 35 4 30