You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($20,000 Investment) Project Y (Slow-Motion Replays of Commercials) ($40,000 Investment) Year Cash Flow Year Cash Flow 1 $ 10,000 1 $ 20,000 2 8,000 2 13,000 3 9,000 3 14,000 4 8,600 4 16,000 a. Calculate the profitability index for project X. b. Calculate the profitability index for project Y.
You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($20,000 Investment) Project Y (Slow-Motion Replays of Commercials) ($40,000 Investment) Year Cash Flow Year Cash Flow 1 $ 10,000 1 $ 20,000 2 8,000 2 13,000 3 9,000 3 14,000 4 8,600 4 16,000 a. Calculate the profitability index for project X. b. Calculate the profitability index for project Y.
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
Section: Chapter Questions
Problem 1PS
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You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
| Project X (Videotapes of the Weather Report) ($20,000 Investment) |
Project Y (Slow-Motion Replays of Commercials) ($40,000 Investment) |
|||||||
| Year | Cash Flow | Year | Cash Flow | |||||
| 1 | $ | 10,000 | 1 | $ | 20,000 | |||
| 2 | 8,000 | 2 | 13,000 | |||||
| 3 | 9,000 | 3 | 14,000 | |||||
| 4 | 8,600 | 4 | 16,000 | |||||
a. Calculate the profitability index for project X.
b. Calculate the profitability index for project Y.
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