Question

The following are the cash flows of two projects:Year Project A Project B0

−$220 −$220 

1  100  120 

2  100  120 

3  100  120 

4  100     

If the opportunity cost of capital is 10%, what is the profitability index for each project? 

Project Profitability Index (round to four decimals)

A.

B.

I got 1.4408 and 1.3564 respectively. These appear to be incorrect.

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