Consider the following projects:

Cash Flows ($)

Project C0 C1 D 10,500 21,000 E 20,500 35,875

Assume that the projects are mutually exclusive and that the opportunity cost of capital is 10%.

a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project Profitability Index D E

b-1. Calculate the profitability-index using the incremental cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profitability-index

b-2. Which project should you choose? Project D Project E