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

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

Year	Cash Flow (I)	Cash Flow (II)
0	$ 73,000	$ 17,100
1	33,000	9,250
2	33,000	9,250
3	33,000	9,250

a-1.	If the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

a-2.	If the company applies the profitability index decision rule, which project should the firm accept?
	multiple choice 1 Project I Project Il

b-1.	What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b-2.	If the company applies the NPV decision rule, which project should it take?
	multiple choice 2 Project I Project II