Problem 9-16 Problems with Profitability Index [LO1, 7]

The Angry Bird Corporation is trying to choose between the following two mutually exclusive design projects:

Year	Cash Flow (I)				Cash Flow (II)
0	$	58,000			$	18,600
1		25,900				10,000
2		25,900				10,000
3		25,900				10,000

a-1	If the required return is 10 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161))

	Profitability Index
Project I
Project II

a-2

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

	Project I
	Project Il

b-1	What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

	NPV
Project I	$
Project II	$

b-2

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

	Project I
	Project II