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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000.

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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4 million and has a present value of cash flows of $6 million. Compute the profitability index for each project. Based on the profitability index, which project should the company prefer? Explain

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