Question: Problems with Profitability Index The Shine On Computer Corporation are trying to choose between the following two niutia1ly exclusive design projects: a. If the required

Problems with Profitability Index The Shine On Computer Corporation are trying to choose between the following two niutia1ly exclusive design projects:

a. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?

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

c. Explain why your answers in (a) and (b) aredifferent.

Year Cash Flow (I) Cash Flow (I) -S 40,000 -S 12,000 6,100

Year Cash Flow (I) Cash Flow (I) -S 40,000 -S 12,000 6,100 18,000 6,100 18,000 18,000 6,100 2.

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