Question: Rowan Co. Is considering two alternative investment projects. Each requires a $250,000 initial investment. Project A is expected to generate net cash flows of $60,000

Rowan Co. Is considering two alternative investment projects. Each requires a $250,000 initial investment.
Project A is expected to generate net cash flows of $60,000 per year the next six years. Project B is expected
to generate net cash flows of $50,000 per year over the next seven years. Management requires an 8% rate

of return on is investments.

Compute each project's net present value.
Compute each project's profitability index
If the company can choose only one project, which should it choose, based on profitability index?

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