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Category > Business & Finance Posted 19 May 2017 My Price 7.00

Problem 12-19 Use of profitability index

Problem 12-19 Use of profitability index [LO4]

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)
($54,000 Investment)		   Project Y (Slow-Motion
Replays of Commercials)
($74,000 Investment)
Year Cash Flow   Year Cash Flow   
1 $ 27,000     1 $ 37,000  
2   25,000     2   30,000  
3   25,000     3   31,000  
4   23,600     4   33,000  
 

  

a.

Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)

    

  Profitability index   

  

b.

Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)

  

  Profitability index   

  

c.

Which project would you select?
    
 
  Project X
  Project Y

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Status NEW Posted 19 May 2017 04:05 AM My Price 7.00

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