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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:
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| Year | Cash Flow (I) |
 | Cash Flow (II) |
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| 0 | –$ | 59,000 |  |  | –$ | 18,500 |  |
| 1 | Â | 26,900 | Â | Â | Â | 9,950 | Â |
| 2 | Â | 26,900 | Â | Â | Â | 9,950 | Â |
| 3 | Â | 26,900 | Â | Â | Â | 9,950 | Â |
| Â | |||||||
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| 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.) |
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| Â | Profitability Index |
|
| Â Â Project I | Â Â | |
| Â Â Project II | Â Â | |
| Â | ||
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| a-2 |
If the company applies the profitability index decision rule, which project should the firm accept? |
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| 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.) |
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| Â | NPV | |
| Â Â Project I | $Â Â Â | |
| Â Â Project II | $Â Â Â | |
| Â | ||
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| b-2 |
If the company applies the NPV decision rule, which project should it take? |
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