a. Calculate the profitability index for each investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Calculate the NPV for each investment. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Broxton Group, a consumer electronics conglomerate, is reviewing its annual budget in
wireless technology. It is considering investments in three different technologies to
develop wireless communication devices. Consider the following cash flows of the three
independent projects. Assume the discount rate is 9 percent. Further, the company has
only $16 million to invest in new projects this year.
a.
Year
b.
O
123
Cash Flows (in $ millions)
L6 G5
Wi-Fi
5.0
$ $
8.0
4.5
2.5
11
9260
24
16
$
a. Calculate the profitability index for each investment. (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
b. Calculate the NPV for each investment. (Do not round intermediate calculations and
enter your answers in dollars, not millions of dollars, rounded to 2 decimal places,
e.g., 1,234,567.89.)
L6 profitability index
G5 profitability index
Wi-Fi profitability index
L6 NPV
G5 NPV
Wi-Fi NPV
16
14
28
16
Transcribed Image Text:9 eBook Print References Broxton Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects. Assume the discount rate is 9 percent. Further, the company has only $16 million to invest in new projects this year. a. Year b. O 123 Cash Flows (in $ millions) L6 G5 Wi-Fi 5.0 $ $ 8.0 4.5 2.5 11 9260 24 16 $ a. Calculate the profitability index for each investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Calculate the NPV for each investment. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) L6 profitability index G5 profitability index Wi-Fi profitability index L6 NPV G5 NPV Wi-Fi NPV 16 14 28 16
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