1. The Black Horse is currently considering a project that will produce cash inflows of $10,216 a year for three years followed by $5,626 in year 4. The cost of the project is $33,172. What is the profitability index if the discount rate is 7 percent?

2. A project has the following cash flows. What is the payback period?

Year Cash Flow

0 -$65,905

1 $20,762

2 $23,403

3 $14,944

4 $11,644