A company is considering a $2,000 investment in a project with the following predicted cash flows in the subsequent four years: $1,300; $950; $700, and $300. It requires a 12% return. What is the profitability index for this investment, and what does it suggest?
- Because the profitability index is 1.30, the company should accept the opportunity.
- Because the profitability index is 1.30, the company should reject the opportunity.
- Because the profitability index is 1.24, the company should accept the opportunity.
- Because the profitability index is 1.24, the company should reject the opportunity.