Question: ABC Corporation is evaluating two projects, Project A and Project B, with the following information: Project A: Cost of Capital - 10%, Initial Investment -

ABC Corporation is evaluating two projects, Project A and Project B, with the following information:

  • Project A: Cost of Capital - 10%, Initial Investment - $200,000, Cash Inflow Year 1 - $60,000, Cash Inflow Year 2 - $80,000, Cash Inflow Year 3 - $100,000
  • Project B: Cost of Capital - 9%, Initial Investment - $250,000, Cash Inflow Year 1 - $70,000, Cash Inflow Year 2 - $90,000, Cash Inflow Year 3 - $110,000 Conduct a profitability index analysis for Project A and Project B. Determine the most financially attractive option and justify your choice.

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