Question: Company BBB is evaluating two investment projects. Project A has an initial investment of $400,000 and is expected to generate cash flows of $100,000 per

Company BBB is evaluating two investment projects. Project A has an initial investment of $400,000 and is expected to generate cash flows of $100,000 per year for 5 years. Project B has an initial investment of $450,000 and is expected to generate cash flows of $120,000 per year for 4 years. Calculate the profitability index (PI) for each project and recommend the one with the highest PI. Explain the profitability index (PI) as a capital budgeting technique used to assess investment projects' profitability relative to their initial investment cost. Discuss the advantages and limitations of the profitability index method in investment decision-making and its suitability for comparing projects of varying sizes and durations.

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