Question

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions.

Year         Project A Cash Flow        Project B Cash Flow

0                         ($50,000)                      ($20,000)

1                           15,000                           6,000

2                           15,000                           6,000

3                           15,000                           6,000

4                           13,500                           5,400

5                           13,500                           5,400

6                             6,750                           5,400

What is the profitability index of project B?

Group of answer choices

1.09

1.01

.94

1.06

1.03

then calculate the net present value of project A.

Group of answer choices

$3,802

$1,245.11

$2,709,21

$1,564.25

$342.28

Answer 1