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You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an

You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 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) ($42,000 Investment) Project Y (Slow-Motion Replays of Commercials) ($62,000 Investment)
Year Cash Flow Year Cash Flow
1 $ 21,000 1 $ 31,000
2 19,000 2 24,000
3 20,000 3 25,000
4 19,600 4 27,000

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?

multiple choice

Project X

Project Y

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