A firm is considering a project that requires an initialinvestment of $250,000. The life of this project is five years.Cash flows for each year are estimated as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| $80,000 | $120,000 | $160,000 | $40,000 | -$90,000 |
The cost of capital of this project is 8%. Calculate theprofitability index and make a decision.
