Calculate the profitability index for project X. B. Calculate the profitability for project Y C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 perce
Calculate the profitability index for project X. B. Calculate the profitability for project Y C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 perce
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
Problem 1PS
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A. Calculate the profitability index for project X.
B. Calculate the profitability for project Y
C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 percent
Transcribed Image Text:mework (part 1)
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Problem 12-25
You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 13 percent. Use Appendix B.
Project X (DVDs
Project Y (Slow-Motion
Replays of Commercials)
of the Weather Reports)
($44,000 Investment)
($64,000 Investment)
Year
Year
Cash Flow
Cash Flow
$22,000
1
1
$32,000
2
20,000
2
25,000
ces
3
21,000
3
26,000
4
20,600
4
28,000
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 Pl approach, which project would you select? Use a discount rate of 13 percent.
O Project Y
O Project X
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