Consider the following projects: Cash Flows ($) Project C0 C1 D 10,900 21,800 E 20,900 36,575

Assume that the projects are mutually exclusive and that the opportunity cost of capital is 8%.

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

or

Project E.