Bunnings Ltd is considering to invest in one of the two following projects to buy a newequipment. Each equipment will last 5 years and have no salvage value at the end. Thecompany’s required rate of return for all investment projects is 8%. The cash flows of theprojects are provided below.Equipment 1 Equipment 2Cost $186,000 $195,000Future Cash FlowsYear 1Year 2Year 3Year 4Year 586 00093 00083 00075 00055 00097 00084 00086 00075 00063 000Required: Identify which option of equipment should the company accept based onProfitability Index?

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