The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 $ 81,000 $ 39,000 1 31,500 13,500 2 41,000 28,500 3 47,000 22,500 a.

If the required return is 14 percent, what is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

Profitability index:

Project I =______

Project II =______

If the required return is 14 percent and the company applies the profitability index decision rule, which project should the firm accept?