Question
18) You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 12 percent. UseAppendix Bfor an approximate
18)
| You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 12 percent. UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods. |
| Project X (Videotapes of the Weather Report) ($16,000 Investment) | Project Y (Slow-Motion Replays of Commercials) ($36,000 Investment) | |||||||
| Year | Cash Flow | Year | Cash Flow | |||||
| 1 | $ | 8,000 | 1 | $ | 18,000 | |||
| 2 | 6,000 | 2 | 11,000 | |||||
| 3 | 7,000 | 3 | 12,000 | |||||
| 4 | 6,600 | 4 | 14,000 |
| a. | Calculate the profitability index for project X.(Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Profitability index |
| b. | Calculate the profitability index for project Y.(Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Profitability index |
| c. | Which project would you select? | ||
|
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Financial Markets and Institutions
Authors: Jeff Madura
11th Edition
1133947875, 9781305143005, 1305143000, 978-1133947875
