Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects:...
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| Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects: |
| Year | Cash Flow (I) | Cash Flow (II) | |||||
| 0 | $ | 50,000 | $ | 24,800 | |||
| 1 | 24,700 | 13,200 | |||||
| 2 | 24,700 | 13,200 | |||||
| 3 | 24,700 | 13,200 | |||||
| a-1. | If the required return is 11 percent, what is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) |
PROJECT I: 1.207
PROJECT II: 1.301
| b-1. | What is the NPV for each project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
PROJECT I:
PROJECT II:
| b-2. | If the company applies the NPV decision rule, which project should it take? |
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