• A company is considering two mutually exclusive investment projects:
  • Project A: Initial investment of $200,000, generates cash flows of $50,000 per year for 5 years.
  • Project B: Initial investment of $300,000, generates cash flows of $80,000 per year for 7 years.
• Calculate the payback period and the profitability index for each project. Which project should the company choose if its required rate of return is 10%?