The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Cash Flow (II) -$ 51,000 Cash Flow (I) -$ 85,000 34,900 45,000 28,000 12,300 32,500 23,500 Year 0 1 2 3 a-1. If the required return is 10 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 10 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I Project II a-2. b-1. Project I Project II b-2. Answer is not complete. Project II Project I 1.058

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The Michner Corporation is trying to choose between the following two mutually exclusive design projects:
Cash Flow (II)
-$ 51,000
12,300
32,500
23,500
Year
0
1
2
3
Cash Flow (I)
-$ 85,000
34,900
45,000
28,000
a-1. If the required return is 10 percent, what is the profitability index for each project?
Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.
a-2. If the company applies the profitability index decision rule, which project should it take?
b-1. If the required return is 10 percent, what is the NPV for each project?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b-2. If the company applies the net present value decision rule, which project should it take?
a-1. Project I
Project II
a-2.
b-1. Project I
Project II
b-2.
Answer is not complete.
Project II
Project I
1.058
Transcribed Image Text:The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Cash Flow (II) -$ 51,000 12,300 32,500 23,500 Year 0 1 2 3 Cash Flow (I) -$ 85,000 34,900 45,000 28,000 a-1. If the required return is 10 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 10 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I Project II a-2. b-1. Project I Project II b-2. Answer is not complete. Project II Project I 1.058
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