Question: You are considering two mutually exclusive projects with the following cash flows.The appropriate cost of capital for Project A is 10%.The appropriate cost of capital

You are considering two mutually exclusive projects with the following cash flows.The appropriate cost of capital for Project A is 10%.The appropriate cost of capital for Project B is 14%.

Year 0

Year 1

Year 2

Year 3

Project A

-$1,000

$500

$600

$700

Project B

-$10

$10

$20

$30

Find the Profitability Index of each project.Based solely on PI, what is your capital budgeting decision?

Find the Payback Period of each project.Based solely on Payback, what is your capital budgeting decision?

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