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Calculate the profitability index of the two opportunities

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Reference no: EM133167118

Question - Brian Lee is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Brian uses a 12% discount rate.

 

Option 1

Option 2

Equipment purchase and installation

$70,200

$81,980

Annual cash flow

$28,600

$30,840

Equipment overhaul in year 6

$4,950

-

Equipment overhaul in year 8

-

$6,000

Required - Calculate the profitability index of the two opportunities.

Reference no: EM133167118

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