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Compute the net present value and profitability index

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Question - McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $464,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $68,100. Project B will cost $342,000, has an expected useful life of12years, a salvage value of zero, and is expected to increase net annual cash flows by $50,900. A discount rate of8% is appropriate for both projects.

Compute the net present value and profitability index of each project.

Which project should be accepted based on Net Present Value?

Which project should be accepted based on profitability index?

Reference no: EM132800756

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