You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 10 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) ($34,000 Investment)

1 $ 17,000

2 15,000

3 16,000

4 15,600

Project Y (Slow-Motion Replays of Commercials) ($54,000 Investment) Year Cash Flow Year Cash Flow

1 $ 27,000

2 20,000

3 21,000

4 23,000

a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. Which project would you select based on the profitability index?

Project X

Project Y