Calculating Profitability Index: Suppose the following two independent investment opportunities are available to Relax, Inc. The appropriate discount rate is 8.5 percent.

Year Project Alpha Project Beta

0 -$2,100 -$3,000

1 1,200 800

2 1,100 2,300

3 900 2,900

A) compute the profitability index for each of the two projects

B) Which project(s) should the company accept based on the profitability index rule?

Formula for Profitability Index (PI)= Present Value of Future Value Cash Flow's / Initial Investment

How do I calculate the present value of future value cash flows and what is my initial investment?