Question
You are asked to evaluate the following two projects for Boring Corporation. Project Alpha (DVDs of the Weather Reports) ($42,000 Investment) Project Omega (Slow-Motion Replays
You are asked to evaluate the following two projects for Boring Corporation.
| Project Alpha (DVDs of the Weather Reports) ($42,000 Investment) | Project Omega (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 |
Required:
Use a discount rate of 14 percent.
a. Calculate the NPV and the profitability index for project Alpha.
b. Calculate the NPV and the profitability index for project Omega.
c. Using the NPV method combined with the PI approach, which project would you select?
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Financial Innovation Regulation And Crises In History
Authors: Harold James
1st Edition
0367669528, 978-0367669522
