The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0123 -$ 75,000 -$ 33,000 1 28,500 10,500 2 3 22,500 16,500 35,000 41,000 a-1. If the required return is 13 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 13 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I b-2. Project II
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0123 -$ 75,000 -$ 33,000 1 28,500 10,500 2 3 22,500 16,500 35,000 41,000 a-1. If the required return is 13 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 13 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I b-2. Project II
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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Transcribed Image Text:The Michner Corporation is trying to choose between the following two mutually exclusive design
projects:
Year
Cash Flow (I)
Cash Flow (II)
0123
-$ 75,000
-$ 33,000
1
28,500
10,500
2
3
22,500
16,500
35,000
41,000
a-1. If the required return is 13 percent, what is the profitability index for each project?
Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.
a-2. If the company applies the profitability index decision rule, which project should it take?
b-1. If the required return is 13 percent, what is the NPV for each project?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b-2. If the company applies the net present value decision rule, which project should it take?
a-1. Project I
a-2.
Project II
b-1. Project I
b-2.
Project II
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