You are choosing between two mutually exclusive projects: Year Cash Flow (I) Cash Flow (II) 0 –$78,000 –$36,000 1 30,000 12,000...

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Finance

You are choosing between two mutually exclusive projects:
Year Cash Flow (I) Cash Flow (II)
0 –$78,000       –$36,000
1 30,000       12,000
2 38,000       25,500
3 44,000       19,500
Requirement 1:
(a)
If the required return is 13 percent, what is the profitabilityindex for each project? (Do not round intermediatecalculations. Round your answers to 3 decimalplaces (e.g., 32.161).)
Profitability index
  Project I
  Project II
(b)
If the required return is 13 percent and the company applies theprofitability index decision rule, which project should the firmaccept?
(Click to select)Project IProject II
Requirement 2:
(a)
If the required return is 13 percent, what is the NPV for eachproject? (Do not round intermediatecalculations. Round your answers to 2 decimalplaces (e.g., 32.16).)
Net present value
  Project I $
  Project II $

Answer & Explanation Solved by verified expert

3.8 Ratings (693 Votes)

aProject I PV of future cash flows is calculated using a financial calculator by inputting the below Press the CF button CF0 78000 Cash flow for each year should be entered Press Enter and down arrow after inputting each cash flow After entering the last cash flow cash flow press the NPV button and enter the discount rate of 13 Press enter after that Press the down arrow and CPT buttons to get the net present value The present value See Answer

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