Question
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 $ 65,000
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects:
| Year | Cash Flow (I) | Cash Flow (II) | |||||
| 0 | $ | 65,000 | $ | 17,900 | |||
| 1 | 30,000 | 9,650 | |||||
| 2 | 30,000 | 9,650 | |||||
| 3 | 30,000 | 9,650 | |||||
| a-1 | If the required return is 12 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) |
| Profitability Index | |
| Project I | |
| Project II |
| a-2 | If the company applies the profitability index decision rule, which project should the firm accept? | ||||
|
| b-1 | What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| Project I | $ |
| Project II | $ |
| b-2 | If the company applies the NPV decision rule, which project should it take? | ||||
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Campaign Finance Reform
Authors: Melissa M. Smith, Glenda C. Williams, Larry Powell, Gary A. Copeland
1st Edition
0739145657, 978-0739145654
