Two projects: apply profiability index, NPV. Which project
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The required return is 12% on a project.
Year Project Y Project Z
0 -35,000 -60,000
1 16,000 25,000
2 13,000 24,000
3 15,000 22,000
4 11,000 21,000
a) What is the profitability index for each project?
b) What is the NPV for each project?
c) Which (if any) of the projects should the company accept?
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Solution Summary
This solution is comprised of a detailed explanation to answer what is the profitability index for each project.
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See attached Excel file for calculations.
Project Y Project Z
Year Annual Cash flow Present Value Year Annual Cash flow Present Value
0 (35,000) (35,000) 0 (60,000) (60,000)
1 16,000 14,286 1 25,000 22,321
2 13,000 10,364 2 ...
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