Question
You are asked to evaluate the following two projects for the Norton corporation. Use a discount...
You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($36,000 Investment) Project Y (Slow-Motion Replays of Commercials) ($56,000 Investment) Year Cash Flow Year Cash Flow 1 $ 18,000 1 $ 28,000 2 16,000 2 21,000 3 17,000 3 22,000 4 16,600 4 24,000
a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)
c. Which project would you select based on the profitability index?
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