Return to question Problem 8-25 Profitability Index versus NPV (LO3) Consider projects A and B with the following cash flows: Ce C2 C3 A -$39 $23 .5 23 23 B - 54 33 33 33 a-1. What is the NPV of each project if the discount rate is 15%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which project has the higher NPV? b-1. What is the profitability index of each project? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitability Index? c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise? Answer is complete but not entirely correct. places b-2. Which project has the higher profitability index? c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise? Answer is complete but not entirely correct. Project A Project B NPV of each project if the discount rate is 15% S 13.510S 11.35 Which project has the higher NPV? Project A Profitability index of each project $ 1.36 $ 1.18 Which project has the higher profitability index? Project A Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its Both investment projects? Which project is most attractive to a firm that is limited in the funds it can raise? Project A Problem 8-12 NPV/IRR (LO1) A new computer system will require an initial outlay of $22,000, but it will increase the firm's cash flows by $4,700 a year for each of the next 7 years a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) $ 881.57 Net present value Worth installing b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 15% (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Net present value Worth installing c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Maximum discount rate