Consider the following projects:

Cash Flows ($)
Project	C0	C1
D	–11,200	22,400
E	–21,200	37,100

Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%.

a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	Profitability Index
D
E

b-1. Calculate the profitability-index using the incremental cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Profitability-index            

b-2. Which project should you choose?

	Project D
	Project E

Answer rating: 100% (QA)

To calculate the profitability index for each project we need to divide the present value of the cas... View the full answer