Evaluate the following three projects in terms of the profitability index. Assume a cost of capital of 14%.

Project
Liquidate	Recondition	Replace
Initial Cash Outflow:	-$100,000	-$400,000	-$1,000,000
Year 1 cash inflow	$70,000	$110,000	$600,000
Year 2 cash inflow	50,000	150,000	600,000
Year 3 cash inflow	55,000	200,000	600,000

1. Rank these projects by their PIs.

   1.	-Select-LiquidateReconditionReplaceItem 1
   2.	-Select-LiquidateReconditionReplaceItem 2
   3.	-Select-LiquidateReconditionReplaceItem 3

2. If the projects are independent, which would you accept according to the PI criterion?

   1.	Liquidate	-Select-acceptrejectItem 4
   2.	Recondition	-Select-acceptrejectItem 5
   3.	Replace	-Select-acceptrejectItem 6

3. If these projects are mutually exclusive, which would you accept according to the PI criterion?-Select-LiquidateReconditionReplaceItem 7
4. Apply the NPV criterion to the projects, rank them according to their NPVs and indicate which you would accept if they are independent and mutually exclusive.

   1.	-Select-LiquidateReconditionReplaceItem 8
   2.	-Select-LiquidateReconditionReplaceItem 9
   3.	-Select-LiquidateReconditionReplaceItem 10

   Which you would accept if they are independent.

   1.	Liquidate	-Select-acceptrejectItem 11
   2.	Recondition	-Select-acceptrejectItem 12
   3.	Replace	-Select-acceptrejectItem 13