McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $510,631, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,300. Project B will cost $329,590, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $49,600. A discount rate of 8% is appropriate for both projects. Click here to view PV table.

Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value - Project A$

Profitability index - Project A--------------

Net present value - Project B$

Profitability index - Project B------------

Which project should be accepted based on Net Present Value?

select a project that should be accepted based on the Net Present Value

Project A or Project B should be accepted.

Which project should be accepted based on profitability index?

select a project that should be accepted based on the profitability index

Project A or Project B should be accepted.