1. Two projects have the following cash flows: Year 1 Year 2 Year 3 Year 4 Year 5 Cash flow Project 1 $140 $200 $245 $275 $300 Cash flow Project 2 $300 $350 $500 $0 $0 If the Yield is 10% per year for each project. Which is the project with the lowest investment (lowest present value)?
2. You are offered an investment with returns of $ 2,911 in year 1, $ 3,782 in year 2, and $ 4,000 in year 3. The investment will cost you $ 6,493 today. If the appropriate Cost of Capital (quoted interest rate) is 12.1 %, what is the Profitability Index of the investment? Enter your answer to the nearest .01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.