Pharoah Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $$494,000,$ has an expected useful life of $12$ years and a salvage value of zero, and is expected to increase net annual cash flows by $$68,400.$ Project B will cost $$331,000,$ has an expected useful life of $12$ years and a salvage value of zero, and is expected to increase net annual cash flows by $$47,000.$ A discount rate of $7\%$ is appropriate for both projects. Click here to view the factor 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$.15\mathrm{.}25.$ 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?

should be accepted.

Which project should be accepted based on profitability index?

should be accepted.

TABLE $3$ Present Value of $1$

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