Question: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 360,000 $45,000 1 35,000 23,000 2 55,000 21,000 3

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 $ 360,000 $45,000

1 35,000 23,000

2 55,000 21,000

3 55,000 18,500

4 430,000 13,600

Whichever project you choose, if any, you require a 14 percent return on your investment.

What is the discounted payback period for each project?

What is the profitability index for each project?

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