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Calculate the profitability index of the two opportunities

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Reference no: EM132975733

Donald Martin is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Donald uses a 12% discount rate.

                                                                       Option 1                    Option 2

Equipment purchase and installation           $71,100                  $82,150

Annual cash flow                                      $28,100               $30,440

Equipment overhaul in year 6               $4,710

Equipment overhaul in year                   8 $5,970

Problem 1: Calculate the profitability index of the two opportunities

Reference no: EM132975733

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