Question: A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and is expected to generate cash inflows of $30,000

A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and is expected to generate cash inflows of $30,000 at the end of each year for five years. Project B has an initial cost of $200,000 and is expected to generate cash inflows of $70,000 at the end of each year for five years. The company has a cost of capital of 12%.

a) Calculate the net present value (NPV) and profitability index (PI) for both projects.

b) Which project should the company choose based on the NPV and PI?

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