Question

Problem 12-19 Use of profitability index [LO4]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)
 YearCash Flow YearCash 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?    Project XProject Y

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