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The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 $89,000 $57,000

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

Year Cash Flow (I) Cash Flow (II)
0 $89,000 $57,000
1 38,900 11,100
2 49,000 36,500
3 29,000 30,500

Requirement 1:
(a)

If the required return is 12 percent, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

Profitability index
Project I
Project II

(b)

If the required return is 12 percent and the company applies the profitability index decision rule, which project should the firm accept?

(Click to select)Project IProject II

Requirement 2:
(a)

If the required return is 12 percent, what is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Net present value
Project I $
Project II $

(b) If the company applies the NPV decision rule, which project should it take?

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