1) Determine the profitability index for the investment with the given cash flows given a 9% required return?
Year Cash Flow
0 $-20,500
1 $7,300
2 $9,500
3 $8,500
2) You are offered the contract with signing bonus. If they presented you either $215,000 in cash or $2,000 a month for 15 years, guaranteed, which do you take (based strictly on the math)? Your safe rate of return is 7.5%.