Question
You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 14 percent. Use Appendix B. Project X (DVDs
You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 14 percent. Use Appendix B.
Project X (DVDs of the Weather Reports) ($30,000 Investment) | Project Y (Slow-Motion Replays of Commercials) ($50,000 Investment) | |||||||||
Year | Cash Flow | Year | Cash Flow | |||||||
1 | $15,000 | 1 | $25,000 | |||||||
2 | 13,000 | 2 | 18,000 | |||||||
3 | 14,000 | 3 | 19,000 | |||||||
4 | 13,600 | 4 | 21,000 | |||||||
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 14 percent.
multiple choice
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Project Y
-
Project X
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