The Romo Corporation is trying to choose between the following two mutually exclusive design projects:

a. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?
b. If the company applies the NPV decision rule, which project should it choose?
c. Explain why your answers in (a) and (b) are different.

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YEAR CASH FLOW (I) CASH FLOW (II) -$60,000 32,000 32,000 32,000 $34,000 20,000 20,000 20,000