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) ($20,000 Investment)						Project Y (Slow-Motion Replays of Commercials) ($40,000 Investment)
Year		Cash Flow				Year		Cash Flow
1		$	10,000			1		$	20,000
2			8,000			2			13,000
3			9,000			3			14,000
4			8,600			4			16,000

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