XYZ Corp. is planning buy a new machine with an initial cost of $10,000. This machine has an estimated life of 5 years and is expected to produce cash flows as shown below. Calculate the profitability index and justify your answer. Assume a weighted average cost of capital of 7%.

0 1 2 3 4 5

-10,000 3.500 3,500 3,500 1,200 1,200