Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 -$ 347,000 -$ 49,500
1 48,000 24,300
2 68,000 22,300
3 68,000 19,800
4 443,000 14,900
Whichever project you choose, if any, you require a 15 percent return on your investment.
What is the discounted payback period for each project?
What is the profitability index for each project?