Question 25

Jefferson International is trying to choose between the flowing two mutually exclusive design projects.

Year	Cash Flow (A)	Cash Flow (B)
0	-$79,000	-$12,500
1	18,500	5,800
2	39,600	21,800
3	48,700	25,600

The required rate of return is 9 percent. Project A has a profitability index of 1.3 and project B has a profitability index of 1.24. Which project should the firm accept and why? Choose the answer with the "best" reasoning.

Group of answer choices

Project A because it has a higher profitability index

Project B because it has a higher profitability index

Project A because it has a higher NPV

Project B because it has a higher NPV

Project B because it has a higher profitability index and NPV