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PROBLEM 3 (25 MARKS) You are given the following set of cash flows for an investment project: Year Cash Flow 0 -$18,000 1 10,300

PROBLEM 3 (25 MARKS) You are given the following set of cash flows for an investment project: Year Cash Flow 0 -$18,000 1 10,300 2 9,200 3 5,700 a) What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? b) What is the profitability index if the relevant discount rate is 20 percent? c) If you were deciding on this project, which of the 2 rates do you prefer?

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