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    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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    https://brainmass.com/business/capital-budgeting/two-projects-apply-profiability-index-npv-282346

    Solution Preview

    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 ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the profitability index for each project.

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