You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 12 percent. Use Appendix B.

Project X (DVDs of the Weather Reports) ($48,000 Investment)						Project Y (Slow-Motion Replays of Commercials) ($68,000 Investment)
Year		Cash Flow				Year		Cash Flow
1			$24,000			1			$34,000
2			22,000			2			27,000
3			23,000			3			28,000
4			22,600			4			30,000

a. Calculate the profitability index for project X. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.)

PI

b. Calculate the profitability index for project Y. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.)

PI

c. Using the NPV method combined with the PI approach, which project would you select? Use a discount rate of 12 percent.

multiple choice

• Project Y

• Project X

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