You are asked to evaluate the following two projects for the Norton corporation. Project X ( Videotapes
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Question:
You are asked to evaluate the following two projects for the Norton corporation.
Project X ( Videotapes of the Weather Report)($50,000 Investment)
| Year | Cash Flow |
|---|---|
| 1 | $25,000 |
| 2 | $23,000 |
| 3 | $24,000 |
| 4 | $23,600 |
Project Y (Slow-motion replays of commercials) ($70,000 investment)
| Year | Cash Flow |
|---|---|
| 1 | $35,000 |
| 2 | $28,000 |
| 3 | $29,000 |
| 4 | $31,000 |
Use a discount rate of 12 percent. Calculate and answer the following using formula and financial calculator methods
1) Calculate the profitability index for project X
2) Calculate the profitability index for project Y
3) Which project would you select?
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