Question: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $218,917 $16,419 1 25,700 5,985 2 53,000 8,370 3 58,000

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $218,917 $16,419
1 25,700 5,985
2 53,000 8,370
3 58,000 13,931
4 420,000 8,655

Whichever project you choose, if any, you require a 6 percent return on your investment.

What is the profitability index for Project A?

What is the profitability index for Project B?

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