Calculate and interpret the profitability index for a company with the following cash flows. The required return is 8% and the company wants a two year payback.

Year Cash flows

0 -200,000

1 100,000

2 50,000

3 50,000

4 50,000

5 20,000

		1.13; Acceptable
		1.13; Not acceptable
		0.13; Not acceptable
		0.13; Acceptable