t15

You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 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) ($52,000 Investment) Year Cash Flow 1 $26,000 2 24,000 3 25,000 4 24,600 Project Y (Slow-Motion Replays of Commercials) ( $72,000 Investment) Year Cash Flow 1 $ 36,000 2 29,000 3 30,000 4 32,000 a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.) Profitability index b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.) Profitability index c. Which project would you select based on the profitability index? Project X O Project Y