You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project X (Videotapes of the Weather Report) ($26,000 Investment)						Project Y (Slow-Motion Replays of Commercials) ($46,000 Investment)
Year		Cash Flow				Year		Cash Flow
1		$	13,000			1		$	23,000
2			11,000			2			16,000
3			12,000			3			17,000
4			11,600			4			19,000

a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Profitability Index: ______

b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Profitability Index: ______

c. Which project would you select based on the profitability index?

multiple choice

• Project X

• Project Y