Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $590,000 and has a present value of cash flows of $2,350,000.0. Project 2 requires an initial investment of $4,000,000 and has a present
value of cash flows of $7,000,000.
1. Compute the profitability index for each project.
2. Based on the profitability index, which project should the company prefer?