A project will cost $1.9 million. The company uses a 11% discount rate as a threshold for accepting capital projects. It is expected to have a 5 year life and return the following:
Year 1 $400,000
Year 2 $500,000
Year 3 $650,000
Year 4 $900,000
Year 5 $600,000
a. Calculate the project's Net Present Value (NPV)
b. Calculate the Profitability Index