Three different decision rules were used to consider two projects. Based on the information presented in the table below, answer the following questions.

1.) Which one of the projects would you chose based on the NPV rule? Why?

2.) Which one of the projects would you chose based on the IRR rule assuming r=4%? Why?

3). Which one of the projects would you chose based on the PI rule? Why?

4). Now that you analyzed projects under each decision rule, what would be your final decision? Which project would you choose? Why?

5.) You have just received a piece of new information; the project Ball actually has an NPV of -7,237. Would this new information change your final decision as to which project to accept/reject? How?

PROJECT BALL PROJECT CAR

NPV 7,237 DOLARS -11,425 DOLARS

IRR 6% 9%

PI 0.67 0.81