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Which project should be accepted

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McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $400,000 has an expected useful life of 10 years, a salvage value zero and is expected to increase net annual cash flows by $70,000.

Project B will cost $310,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flow by $55,000. A discount rate of 9% is appropriate for both parties. Compute the net present value and profitability index of each project. Which project should be accepted?

Reference no: EM131692390

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