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23.
Award: 10.00 points Problems? Adjust credit for all students.
Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of
cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000.
1. Compute the profitability index for each project.
2. Based on the profitability index, which project should the company prefer?
Complete this question by entering your answers in the tabs below.
Based on the profitability index, which project should the company prefer?
Required 1 Required 2
Based on the profitability index, which project should the company prefer?
 
Project 1
Explanation:
2.
Higher values of the profitability index indicate a better project, so on the basis of this measure the company should select Project 1.
Hint #1
References Hints