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3. The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 $84,000

3.

The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects:

Year Cash Flow (I) Cash Flow (II)
0 $84,000 $42,000
1 33,900 12,600
2 44,000 31,500
3 50,000 25,500

Requirement 1:
(a)

If the required return is 17 percent, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

Profitability index
Project I
Project II

(b)

If the required return is 17 percent and the company applies the profitability index decision rule, which project should the firm accept?

(Click to select)Project IIProject I

Requirement 2:
(a)

If the required return is 17 percent, what is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Net present value
Project I $
Project II $

(b) If the company applies the NPV decision rule, which project should it take?
(Click to select)Project IProject II

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