B. C. Rogers: Profitability, NPV, Required Return
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B.C. Rogers, Inc., is presented with the following two mutually exclusive projects. The required return is 15%.
PLEASE SEE ATTACHED SPREADSHEET FOR FIGURES.
a) What is the profitability index for each project?
b) What is the NPV for each project?
c) Which, if either, of the projects should the company choose?
Year Project K Project S
0 -35,000 -350,000
1 18,000 120,000
2 17,000 115,000
3 16,000 110,000
4 15,000 105,000
5 14,000 100,000.
The solution is very comprehensive and easy to understand with the formulas disclosed and a table of the values. The problems are solved together with an opinion about whether to accept one or both projects.