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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects:
| Year | Cash Flow (I) |
Cash Flow (II) |
|||||
| 0 | –$ | 59,000 | –$ | 18,500 | |||
| 1 | 26,900 | 9,950 | |||||
| 2 | 26,900 | 9,950 | |||||
| 3 | 26,900 | 9,950 | |||||
| a-1 |
If the required return is 12 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) |
| Profitability Index |
||
| Project I | ||
| Project II | ||
| a-2 |
If the company applies the profitability index decision rule, which project should the firm accept? |
||||
|
| b-1 |
What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | ||
| Project I | $ | |
| Project II | $ | |
| b-2 |
If the company applies the NPV decision rule, which project should it take? |
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