Jester Company is considering two alternative projects Project 1 requires an initial investment of $500,000 and has a net present value of cash flows of $1,200,000 Project 2 requires an initial investment of $3,500,000 and has a net present value of cash flows of $1,900,000 Compute the profitability index for each project Based on the profitability index, which project should the company prefer Explain

Question: Jester Company is considering two alternative projects. Project 1 requires an initial investment of $500,000 and has a net present value of cash flows of

Jester Company is considering two alternative projects. Project 1 requires an initial investment of $500,000 and has a of cash flows of $1,200,000. Project 2 requires an initial investment of $3,500,000 and has a of cash flows of $1,900,000. Compute the profitability index for each project. Based on the profitability index, which project should the company prefer? Explain.

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