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Homework answers / question archive / You are asked to evaluate the following two projects for Boring Corporation

You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 12 percent. Use Appendix B.

Project X (DVDs of the Weather Reports) ($16,000 Investment)

Project Y (Slow-Motion Replays of Commercials) ($36,000 Investment)

Year 1 Cash Flow $8,000 Year 1 Cash Flow $18,000 2 6,000 2 11,000 3 7,000 3 12,000 4 6,600 4 14,000

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 12 percent.

_' Project Y Proiect X

P rpv

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