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Sunlight Limited intends to invest in project Y or project Z. The following are the expected net cash flows from the projects ...

Sunlight Limited intends to invest in project Y or project Z.
The following are the expected net cash flows from the projects
Project
Y Z
Year Sh. Sh.
0 (12,000,000) (10,000,000)
1 3,000,000 4,000,000
2 3,000,000 3,000,000
3 3,200,000 2,000,000
4 2,000,000 4,000,000
5 1,000,000 2,000,000
The company’s cost of capital is 12%

Required:
(i) Calculate the profitability index for each project.
(ii) Advise the management on the project to invest in.