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Calculate the NPV for both projects

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Reference no: EM132859771

Question - The Sloan Corporation is trying to choose between the following two mutually-exclusive design projects:

Year

Cash Flow (A)

Cash Flow (B)

0

$(51,000)

$(14,400)

1

$24,800

$7,800

2

$24,800

$7,800

3

$24,800

$7,800

Required -

a) Calculate the profitability index for both projects if the required return is 10 percent. Based on the profitability index decision rule, which project should the firm accept?

b) Calculate the NPV for both projects if the required return is 10 percent. Based on the NPV decision rule, which project should the firm accept?

c) Explain why your answers for (a) and (b) are different?

Reference no: EM132859771

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