Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $570,000 and has a present value of cash flows of $1,850,000. Project 2 requires an initial investment of $5 million and has a present value of cash flows of $7 million. 1. Compute the profitability index for each project.

Profitability Index
	Choose Numerator:	/	Choose Denominator:	=	Profitability Index
		/		=	Profitability index
Project 1
Project 2

Based on the profitability index, which project should the company prefer?

• Project 1

• Project 2