Question: Consider the following projects: Cash Flows ( $ ) Project C 0 C 1 D 1 0 , 7 0 0 2 1 , 4

Consider the following projects:
Cash Flows ($)
Project C0 C1
D 10,70021,400
E 20,70036,225
Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%.
a. Calculate the profitability index for each project.
b-1. Calculate the profitability-index using the incremental cash flows.
b-2. Which project should you choose?

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