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EFG Ltd. is considering two investment opportunities, Investment E and Investment F, with the following characteristics: Investment E: Cost of Capital - 8%, Initial Investment

EFG Ltd. is considering two investment opportunities, Investment E and Investment F, with the following characteristics:

  • Investment E: Cost of Capital - 8%, Initial Investment - $180,000, Cash Inflow Year 1 - $40,000, Cash Inflow Year 2 - $50,000, Cash Inflow Year 3 - $60,000
  • Investment F: Cost of Capital - 11%, Initial Investment - $220,000, Cash Inflow Year 1 - $50,000, Cash Inflow Year 2 - $60,000, Cash Inflow Year 3 - $70,000 Perform a profitability index analysis for Investment E and Investment F. Discuss the implications of the analysis on investment decision-making.

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