Question

1) Calculating PI & NPV The Multigig Computer Corporation is trying to choose
      between the following two mutually exclusive design projects:

Year              Cash Flow (1)      Cash Flow (2)

0                        -15 000                    - 2 000

1                          8 500                      2 500

2                          8 500                      2 500

3                          8 500                      2 500

(a) If the required rate is 9% and Multigig Computer applies the profitability index
      decision rule, which project should the firm accept?

(b) If the company applies NPV decision rule, which project should it take?

Answer 1