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Project A Year 0- -$110 Year 1- $45 Year 2- $45 Year 3- $45 Year 4- $45 Project B Year 0- -$110 Year 1- $55

Project A

Year 0- -$110

Year 1- $45

Year 2- $45

Year 3- $45

Year 4- $45

Project B

Year 0- -$110

Year 1- $55

Year 2- $55

Year 3- $55

Year 4- $55

If the opportunity cost of capital is 11%, what is the profitability index for each project?

Does the profitability index rank the projects A and B correctly?

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