Question: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$365,000 -$40,000 1 $38,000 $20,300 2 $47,000 $15,200 3 $62,000
Consider the following two mutually exclusive projects:
| Year | Cash Flow (A) | Cash Flow (B) |
| 0 | -$365,000 | -$40,000 |
| 1 | $38,000 | $20,300 |
| 2 | $47,000 | $15,200 |
| 3 | $62,000 | $14,100 |
| 4 | $455,000 | $11,200 |
Whichever project you choose, if any, you require a return of 13 percent on your investment. If you apply the profitability index criterion, which investment will you choose?
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