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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 14 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)
($30,000 Investment)
Project Y (Slow-Motion
Replays of Commercials)
($50,000 Investment)
Year Cash Flow Year Cash Flow
1 $ 15,000 1 $ 25,000
2 13,000 2 18,000
3 14,000 3 19,000
4 13,600 4 21,000


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?

  • Project X

  • Project Y

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