Compute the profitability index for each project

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Reference no: EM13289751

Company K is considering two mutually exclusive projects. The cash flows of the project are:

Year Project A Project B
Initial Outlay -$1,700,000 -$1,700,000
1 400,000
2 400,000
3 400,000
4 400,000
5 400,000
6 400,000
7 400,000 $4,250,000

a. Compute the payback period for each project.
b. Compute the NPV for each project, assuming a 13% required rate of return.
c. Compute the Profitability Index for each Project.
d. Fully explain your logic, how would you decide between these two projects and which would you recommend?

Reference no: EM13289751

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