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McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,241, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,321, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. 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.

Which project should be accepted based on Net Present Value?

Which project should be accepted based on profitability index?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92751861

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