You are heading the R&D department of a growing biotech company. You have identified an investment opportunity that would require a $5 million investment upfront in terms of personnel and lab equipment and subsequent cash outflows of $500,000 per year. The company did a market study that suggests a cash revenue stream of $2.15 million per year for three years and then $1.6 million per year for another three years. At the end of the sixth year, it is estimated that the lab equipment could be sold for a salvage value of $200,000. Assume that all of the cash flows are net of taxes. In terms of risk, the project would be similar to others in the firm, which uses a hurdle rate of 18%.

What is the profitability index for this project? Show your calculations.

A. impossible to determine from the information given

B. 3.05

C. 2.04

D. 1.02