Consider the following projects:

Cash Flows $($$$)$

Project C$0$ C$1$

D $10,70021,400$

E $20,70036,225$

Assume that the projects are mutually exclusive and that the opportunity cost of capital is $12\%.$

a$.$ Calculate the profitability index for each project.

b$-1.$ Calculate the profitability$-$index using the incremental cash flows.

b$-2.$ Which project should you choose?