Question $1[20$ marks$]$

Consider two projects that will generate cash flows at the end of each year, as summarized below:

You must choose only one project over the other $($i$.$e$.,$ the two projects are mutually exclusive$).$

Assume that the required rate of return on both projects is $15\%.$

Answer questions $a)$ and $b)$ below.

a$)[10$ marks$]$ Calculate the net present value $($NPV$)$ of each project and determine which

project should be selected.

$*$For full credit, you must show the steps$/$calculation toward your results.

b$)[10$ marks$]$ Calculate the profitability index $($PI$)$ of each project and determine which project

should be selected.

$*$For full credit, you must show the steps$/$calculation toward your results.