8.

Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $550,000 and has a present value of all its cash flows of $1,700,000. Project 2 requires an initial investment of $4 million and has a present value of all its cash flows of $7 million. (a) Compute the profitability index for each project. (b) Based on the profitability index, which project should the company select?