aughn Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $530,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,000. Project B will cost $346,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,800. A discount rate of 7% is appropriate for both projects.

et present value - Project A		$
Profitability index - Project A
Net present value - Project B		$
Profitability index - Project B

Which project should be accepted based on Net Present Value?

Project AProject B should be accepted.

Which project should be accepted based on profitability index?

Project AProject B

should be accepted.