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Which project should the firm accept

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Question - Problems with Profitability Index- Cori's Sausage Corporation is trying to choose between the following mutually exclusive design projects:

Year

Project 1

Project 2

0

-$45,000

-$19,800

1

23,200

11,700

2

23,200

11,700

3

23,200

11,700

a. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?

b. If the company applies the NPV decision rule, which project should it take?

c. Explain why our answers in (a) and (b) are different?

Reference no: EM133025483

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