Consider the following two mutually exclusive projects:
Year Cash Flow A Cash Flow B
0 -300 000 -40,000
1 20 000 19 000
2 50 000 12 000
3 50 000 18 000
4 390 000 10 500
Assume your require a 10 percent return on your investment. If you apply the profitability index criterion, which investment will you choose? Why? Show your work.