Rudolph Ltd. is deciding between 2 investment options.Rudolph uses an 12% discount rate, the data relevant to the two investments are as follows:

Investment A Investment B

Investment required $40,000 $30,000

Annual cash inflows 9,000 0

Cash inflow at the end of project 0 $120,000

Life of the project 10 years 10 years

Required:

1. Based on NPV which investment would you recommend Rudolph accept? (7 marks)
2. Given that the investments are different, utilize the profitability index.Has your recommendation changed?Explain.(3 marks)