The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0723 -$ 90,000 -$ 58,000 1 39,900 11,800 37,500 31,500 50,000 30,000 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) 0723 -$ 90,000 -$ 58,000 1 39,900 11,800 37,500 31,500 50,000 30,000 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)
0723
-$ 90,000
-$ 58,000
1
39,900
11,800
37,500
31,500
50,000
30,000
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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