Question
Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 $ 62,000
| Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects: |
| Year | Cash Flow (I) | Cash Flow (II) | |||||
| 0 | $ | 62,000 | $ | 36,800 | |||
| 1 | 28,300 | 16,800 | |||||
| 2 | 28,300 | 16,800 | |||||
| 3 | 28,300 | 16,800 | |||||
| a-1. | If the required return is 11 percent, what is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) |
| a-2. | If the company applies the profitability index decision rule, which project should the firm accept? |
|
| b-1. | What is the NPV for each project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| b-2. | If the company applies the NPV decision rule, which project should it take? |
|
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Fundamental Accounting Principles
Authors: Larson Kermit, Tilly Jensen
Volume I, 14th Canadian Edition
71051503, 978-1259066511, 1259066517, 978-0071051507
