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Calculate the profitability index for project X. B. Calculate the profitability for project Y C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 perce

Calculate the profitability index for project X. B. Calculate the profitability for project Y C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 perce

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 12PROB
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A. Calculate the profitability index for project X.

B. Calculate the profitability for project Y

C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 percent

 

mework (part 1) Saved Problem 12-25 You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 13 percent. Use Appendix B. Project X (DVDs Project Y (Slow-Motion Replays of Commercials) of the Weather Reports) ($44,000 Investment) ($64,000 Investment) Year Year Cash Flow Cash Flow $22,000 1 1 $32,000 2 20,000 2 25,000 ces 3 21,000 3 26,000 4 20,600 4 28,000 a. Calculate the profitability Index for project X. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.) PI b. Calculate the profitability Index for project Y. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.) PI c. Using the NPV method combined with the Pl approach, which project would you select? Use a discount rate of 13 percent. O Project Y O Project X www < Prev 5 of 5 *** Next cer F8 & 7 mny 30 F1 F2 @ ± 2 Z² +1 Q A 11 W S F3 E #3 Z X T F4 F5 / $ £ 4 ¢ E R D Alt S4 C F % 5 F6 V E3- ¤ 6 T G < F7 83 ? Y B H 7 U N F9 4 J *00 8 8 2 1 F11 9 93 0 1/4 5 § F10 A K 0 Mo 2 P V 6 L F12 3 NumLk VertNum V Alt Car PrtSc
Transcribed Image Text:mework (part 1) Saved Problem 12-25 You are asked to evaluate the following two projects for Boring Corporation. Use a discount rate of 13 percent. Use Appendix B. Project X (DVDs Project Y (Slow-Motion Replays of Commercials) of the Weather Reports) ($44,000 Investment) ($64,000 Investment) Year Year Cash Flow Cash Flow $22,000 1 1 $32,000 2 20,000 2 25,000 ces 3 21,000 3 26,000 4 20,600 4 28,000 a. Calculate the profitability Index for project X. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.) PI b. Calculate the profitability Index for project Y. (Round "PV Factor" to 3 decimal places. Round the final answer to 2 decimal places.) PI c. Using the NPV method combined with the Pl approach, which project would you select? Use a discount rate of 13 percent. O Project Y O Project X www < Prev 5 of 5 *** Next cer F8 & 7 mny 30 F1 F2 @ ± 2 Z² +1 Q A 11 W S F3 E #3 Z X T F4 F5 / $ £ 4 ¢ E R D Alt S4 C F % 5 F6 V E3- ¤ 6 T G < F7 83 ? Y B H 7 U N F9 4 J *00 8 8 2 1 F11 9 93 0 1/4 5 § F10 A K 0 Mo 2 P V 6 L F12 3 NumLk VertNum V Alt Car PrtSc
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