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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $323,488 $14,468 1 27,200 4,031 2 54,000 8,430 3 60,000

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 $323,488 $14,468

1 27,200 4,031

2 54,000 8,430

3 60,000 13,014

4 384,000 8,806

1 Whichever project you choose, if any, you require a 6 percent return on your investment. What is the profitability index for Project A?

2 What is the profitability index for Project B?

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