Required information The following information applies to the questions displayed below. Project A requires a $405,000 initial investment for new machinery with a five-year life and a salvage value of $38,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $26,300 per year for the next five years. Compute Project A's accounting rate of return. Accounting Rate of Return Choose Denominator: Choose Numerator: - Accounting Rate of Return = Accounting rate of return Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $450,000 and has a present value of cash flows of $1,250,000. Project 2 requires an initial investment of $4 million and has a present value of cash flows of $7 million. 1. Compute the profitability index for each project. Profitability Index 1 Choose Denominator: = Choose Numerator: Profitability Index Profitability index Project 1 Project 2 2. Based on the profitability index, which project should the company prefer? Project 1 Project 2