Question: A company is considering two projects, Project A and Project B. The following information is available for each project: Project A Project B Investment $2,500,000

A company is considering two projects, Project A and Project B.

A company is considering two projects, Project A and Project B. The following information is available for each project: Project A Project B Investment $2,500,000 $2,000,000 Net present value of cash flows $900,000 $800,000 Calculate the profitability index for each project. Based on the profitability index, which project, if any, should the company pursue and why? Project A: 1.36, Project B: 2.10 Project A: 2.77, Project B: 2.10 Project A: 2.77, Project B: 2.50 Project A: 1.36, Project B: 1.40

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