Profitability index.

Given the discount rate and the future cash flow of each project listed in the following table,

Cash Flow Project A Project B Year 0 -2,200,000 -2,500,000 Year 1 700,000 1,250,000 Year 2 800,000 1,150,000 Year 3 900,000 1,050,000 Year 4 1,000,000 950,000 Year 5 1,100,000 850,000 Discount rate 8% 12%

use the PI to determine which projects the company should accept.

What is the PI of project A?

What is the PI of project B?