A company is considering two independent projects, the companys required return is 8 percent and they do not have any capital constraints. Based on the profitability index, what is your recommendation concerning these projects?

Project A Project B

Year Cash Flow Year Cash Flow

0 -$38,500 0 -$42,000

1 $35,000 1 $20,000

2 $24,000 2 $40,000

		You should accept both projects since both of their PIs are positive.
		You should accept both projects since both of their PIs are greater than 1.
		Neither project is acceptable.
		You should only accept project B since it has the largest PI and the PI exceeds 1.
		You should accept only project A since it has the largest PI and the PI exceeds 1.