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Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects: Year...

Cori's Sausage Corporation is trying to choose between the following two mutually exclusive design projects:

Year Cash Flow (I) Cash Flow (II)
0 –$ 47,000 –$ 21,800
1 23,800 12,300
2 23,800 12,300
3 23,800 12,300
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.)

a-2.

If the company applies the profitability index decision rule, which project should the firm accept?

multiple choice 1
  • Project I

  • Project II

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.)

b-2.

If the company applies the NPV decision rule, which project should it take?

multiple choice 2
  • Project II

  • Project I

Solutions

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