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Company applies the profitability index decision rule

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

YearCash Flow (I) Cash Flow (II)0-$58,000 -$18,600 1 25,900 10,000 2 25,900 10,000 3 25,900 10,000

a-1 If the required return for both projects is 10 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.)

Profitability IndexProject IProject II

a-2 If the company applies the profitability index decision rule, which project should the firm accept?

Project I

Project Il

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

NPVProject I$ Project II$

b-2 If the company applies the NPV decision rule, which project should it choose?

Project I

Project

Reference no: EM132528570

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