Question
The Sloan Corporation is trying to chose between the following two mutually exclusive design projects: Year 0: Cash Flow (I) -$73,000, Cash Flow (II) -$17100;
The Sloan Corporation is trying to chose between the following two mutually exclusive design projects: Year 0: Cash Flow (I) -$73,000, Cash Flow (II) -$17100; Year 1: CF (I) $33,000 CF (II) $9,250; Year 2: CF (I) $33,000 CF (II) $9,250; Year 3: CF (I) $33,000 CF (II) $9,250. A-1: If the required return is 11 percent, what is the profitability index for both projects? A-2: if the company applied the profitability index decision rule, which project should the firm accept? B-1: what is the NPV for both projects? B-2: if the company applied the NPV decision rule, which project should it take?
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