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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

  • Project Y

  • Project X

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