Question 1 (3 points)

Jefferson International is trying to choose between the following two mutually exclusive design projects:

Year	Cash Flow (A)			Cash Flow (B)
0	$	55,000		$	29,000
1		12,300			19,400
2		15,100			16,600
3		50,000			900

The required return is 13 percent.

A. Calculate the profitability index of each project. Show details of your calculations for one of the projects in the space provided below:

PI of Project A

PI of Project B

B. Calculate the NPV of each project. Show details of your calculations for one of the projects in the space provided below:

NPV of Project A

NPV of Project B

C. Based on PI, which project would you choose? Based on NPV, which project would you choose? What is your final choice of project and why?

Choice based on PI:

Choice based on NPV:

Final project choice with justification: