Problem
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $532,898, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,300. Project B will cost $365,983, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,800. A discount rate of 9% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project.