PART 1:

You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project X (Videotapes of the Weather Report) ($30,000 Investment)					Project Y (Slow-Motion Replays of Commercials) ($50,000 Investment)
Year	Cash Flow				Year	Cash Flow
1	$	15,000			1	$	25,000
2		13,000			2		18,000
3		14,000			3		19,000
4		13,600			4		21,000

a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)

PART 2:

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project E					Project H
($50,000 Investment)					($42,000 Investment)
Year	Cash Flow				Year	Cash Flow
1	$	14,000			1	$	23,000
2		17,000			2		17,000
3		22,000			3		13,000
4		29,000

a. Determine the net present value of the projects based on a zero percent discount rate.

b. Determine the net present value of the projects based on a discount rate of 13 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)

Appendix B Present value of $1, PVF PV=FvD 17 1+i)" Percent 1% 2% 3% 4% 5% 6% 7% 8% 9% 11% 12% Period 1 2 10% 0.909 0.952 0.943 0.990 0.980 0.971 0.971 0.943 0.915 0.962 0.925 0.890 0.907 0.864 0.980 0.961 0.942 0.924 0.906 0.888 0.917 0.842 0.772 0.708 0.889 0.893 0.797 0.712 0.636 3 4 0.926 0.857 0.794 0.735 0.681 0.961 0.888 0.823 0.855 0.822 5 0.951 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.863 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.784 0.567 6 0.746 0.630 0.942 0.933 0.507 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.837 0.813 0.790 0.760 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.650 0.596 0.547 0.502 7 0.871 0.711 0.583 0.452 0.853 0.731 0.677 0.540 0.404 8 9 0.789 0.766 0.837 0.703 0.645 0.460 0.391 0.923 0.914 0.905 0.896 0.500 0.463 10 0.744 0.676 0.614 0.508 0.422 0.352 0.820 0.804 0.361 0.322 0.287 0.722 0.650 0.585 0.475 0.429 0.388 0.350 0.317 11 12 0.788 0.701 0.625 0.557 0.527 0.497 0.469 0.444 0.397 0.356 0.319 0.887 0.879 0.257 0.286 0.258 13 0.681 0.601 0.530 0.415 0.368 0.290 0.229 0.773 0.758 0.326 0.299 14 0.870 0.661 0.577 0.505 0.442 0.340 0.263 0.232 0.205 0.388 0.362 15 0.861 0.642 0.555 0.417 0.315 0.275 0.239 0.209 0.743 0.728 0.481 0.458 0.183 0.163 16 0.853 0.623 0.534 0.339 0.292 0.252 0.218 0.394 0.371 0.188 0.170 17 0.844 0.605 0.513 0.436 0.270 0.231 0.198 0.146 0.317 0.296 18 0.714 0.700 0.686 0.836 0.587 0.212 0.180 0.153 0.828 0.250 0.232 0.570 0.494 0.475 0.456 0.350 0.331 0.312 19 20 0.164 0.138 0.416 0.396 0.377 0.295 0.277 0.258 0.194 0.178 0.673 0.215 0.149 0.124 0.554 0.478 25 0.610 0.375 0.233 0.184 0.146 0.092 0.074 0.820 0.780 0.742 0.672 0.116 0.075 0.130 0.116 0.104 0.059 0.033 0.011 0.003 30 0.131 0.099 0.552 0.453 0.412 0.307 0.228 0.308 0.208 0.141 0.231 0.142 0.087 0.174 0.097 40 0.057 0.022 0.044 0.015 0.032 0.067 0.034 0.046 0.021 50 0.608 0.372 0.054 0.013 0.009 0.005 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15M 16% 18% 19% 20% 40" 50M 35M 0:741 1 0,885 0.877 0.862 0.847 0.840 0,706 0.870 0756 0.658 25% 0.800 0.640 0.512 30% 0769 0.592 0783 0769 0833 0.694 0.579 0:743 0.718 0.549 0.714 0:510 0364 0:260 0.675 0.641 0.609 0.593 2 3 4 5 0406 0.693 0.613 0,455 0.350 0572 0:499 0482 0.410 0:592 0:519 0:552 0476 0515 0:437 0.301 0223 0.667 0,444 0:296 0.198 0.132 0.088 0.059 0543 0.497 0.419 0:402 6 0480 0:456 0:410 0.370 0:352 0.335 0432 0376 0.328 0.262 0:210 0,269 0.207 0.159 0.123 0. 165 0. 122 0.186 0. 133 0.095 0425 0:314 0279 7 8 9 0400 0:351 0266 0.354 0:305 0263 0.376 0333 0:295 0:233 0:296 0249 0.209 0327 0284 0.168 0.068 0.048 0225 0.194 0.308 0:270 0:237 0.134 0.107 0.091 0.067 0.050 0.037 10 0.039 0026 0017 0:227 0:191 0.094 0.073 0.056 0.162 0.176 0. 148 0.035 0.025 11 0,261 0:135 0247 0:215 0.187 0. 163 0. 162 0.137 0.012 0.008 12 0:231 17% 0.855 0:731 0.624 0.534 0:456 0.390 0.333 0.285 0.243 0.208 0. 178 0.152 0. 130 0.111 0.095 0:081 0.069 0.059 0.051 0.043 0.020 0.009 0.002 0 0.208 0.124 0.086 0.069 0.055 0044 13 0.204 0.182 0.116 0.112 0.093 0:078 0.104 0.043 0.033 0.025 0.027 0:020 0.015 0.018 0.013 0.009 14 0.099 0.181 0. 160 0.141 0. 123 15 0.084 0:020 0088 0.074 0.062 0011 0.160 0.140 0.123 0.108 0.006 0. 195 0.168 0.145 0.125 0.108 0:093 0.080 0.069 0.060 0.051 0:024 0.035 0028 16 0.005 0.003 0.002 0.002 0.001 0.065 0.054 0:045 0.141 0.125 0.107 0:093 0.015 17 0.012 0.009 18 0,095 0.052 0.044 0.037 0.111 0.098 0.005 0.003 0.002 0.002 0.081 0:070 0001 0023 0.018 0:014 0071 0.060 0.051 0.043 0.037 0.016 0.007 0.038 0:031 0.008 0.006 0.005 0.003 0.002 0:001 19 20 0.083 0.073 0.038 0:020 0005 0.087 0.047 0:001 0.007 0.005 0.001 0.061 0.030 0015 0.012 0.004 25 0026 0.010 0.004 0.031 0.013 0.005 0:001 0001 0 30 40 50 0.026 0.008 0.012 0.003 0.004 0:001 0001 0 0 0.002 0.001 0.001 0.001 0 0 0 0