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Problem 9-16 Problems with Profitability Index [LO1, 7] The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash

Problem 9-16 Problems with Profitability Index [LO1, 7]

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

Year Cash Flow (I) Cash Flow (II)
0 $ 73,000 $ 17,100
1 33,000 9,250
2 33,000 9,250
3 33,000 9,250

a-1.

If the required return is 11 percent, what is the profitability index for both projects? (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?

multiple choice 1

Project I

Project Il

b-1.

What is the NPV for both projects? (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?

multiple choice 2

Project I

Project II

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