Question: PQR Corporation is evaluating two mutually exclusive projects, Project P and Project Q, with the following details: Project P: Cost of Capital - 12%, Initial

PQR Corporation is evaluating two mutually exclusive projects, Project P and Project Q, with the following details:

  • Project P: Cost of Capital - 12%, Initial Investment - $180,000, Cash Inflow Year 1 - $40,000, Cash Inflow Year 2 - $50,000, Cash Inflow Year 3 - $60,000
  • Project Q: Cost of Capital - 11%, Initial Investment - $220,000, Cash Inflow Year 1 - $50,000, Cash Inflow Year 2 - $60,000, Cash Inflow Year 3 - $70,000 Conduct a profitability index analysis for Project P and Project Q. Interpret the results and provide a recommendation on the preferred project.

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