6) A firm is evaluating three mutually exclusive capital budgeting projects. The net present value of each project is shown below. Given this information, which project(s) should the firm accept? Project 1 100,000 NPV, S a) accept Projects 1 and 2, and reject Project 3 b) accept Projects 1 and 3, and reject Project 2 c) accept Project 3, and reject Projects 1 and 2 d) accept Project 1, and reject Projects 2 and 3 Project 2 10,000 a) 22.89% b) 0.23% 100% d) 118 18% 7) What is the profitability index of a project that requires an initial investment of $50 mill. and promises cash inflows of $10 mill. per year for the next 10 years, if the annual cost of capital is 10 percent? Note, the firm is using the following formula: Profitability Index (NPV/Initial Investment) 100 Project 3 - 100,000 2