uppose the following two independent investment opportunities are available to Relax, Inc. The appropriate discount rate is 9 percent.

Year	Project Alpha	Project Beta
0	$3,700	$5,300
1	1,900	1,150
2	1,800	3,700
3	1,250	3,600

a.	Compute the profitability index for each of the two projects. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

	Profitability Index
Project Alpha
Project Beta

b.

Which project should the company accept based on the profitability index rule?

	Project Beta
	Project Alpha

eBook & Resources

eBook: 5.6 The Profitability Index