Robben Manufacturing has the following two possible projects. The required return is 10 percent.
Year Project Y Project Z 0 â$ 28,900 â$ 54,000 1 14,900 12,500 2 13,300 40,000 3 15,700 10,500 4 11,300 38,000
a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Profitability index Project Y Project Z
b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
NPV Project Y $ Project Z $
c. Which, if either, of the projects should the company accept?
(Click to select)Project YNeitherProject Z
Robben Manufacturing has the following two possible projects. The required return is 10 percent.
| Year | Project Y | Project Z | |||
| 0 | â$ | 28,900 | â$ | 54,000 | |
| 1 | 14,900 | 12,500 | |||
| 2 | 13,300 | 40,000 | |||
| 3 | 15,700 | 10,500 | |||
| 4 | 11,300 | 38,000 | |||
a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
| Profitability index | ||
| Project Y | ||
| Project Z | ||
b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| NPV | |
| Project Y | $ |
| Project Z | $ |
c. Which, if either, of the projects should the company accept?
(Click to select)Project YNeitherProject Z
Related questions
Consider the following two mutually exclusive projects:
| Year | Cash Flow (A) | Cash Flow (B) | ||
| 0 | â$ | 416,000 | â$ | 35,500 |
| 1 | 48,500 | 19,500 | ||
| 2 | 57,500 | 14,200 | ||
| 3 | 74,500 | 14,100 | ||
| 4 | 531,000 | 10,900 | ||
The required return on these investments is 12 percent.
a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| Payback period | ||
| Project A | years | |
| Project B | years | |
b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| Net present value | ||
| Project A | $ | |
| Project B | $ | |
c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Internal rate of return | ||
| Project A | $ | |
| Project B | $ | |
d. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
| Profitability index | ||
| Project A | ||
| Project B | ||
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects:
| Year | Cash Flow (I) | Cash Flow (II) | |||||
| 0 | â$ | 55,000 | â$ | 18,900 | |||
| 1 | 25,000 | 10,150 | |||||
| 2 | 25,000 | 10,150 | |||||
| 3 | 25,000 | 10,150 | |||||
| a-1 | If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) |
| Profitability Index | ||
| Project I | ||
| Project II | ||
| a-2 | If the company applies the profitability index decision rule, which project should the firm accept? | ||||
|
| b-1 | What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | ||
| Project I | $ | |
| Project II | $ | |
| b-2 | If the company applies the NPV decision rule, which project should it take? | ||||
|
| The Sloan Corporation is trying to choose between the following two mutually exclusive design projects: |
| Year | Cash Flow (I) | Cash Flow (II) | |||||
| 0 | â$ | 56,000 | â$ | 18,800 | |||
| 1 | 26,000 | 10,100 | |||||
| 2 | 26,000 | 10,100 | |||||
| 3 | 26,000 | 10,100 | |||||
| a-1 | If the required return is 12 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) |
| Profitability Index | ||
| Project I | ||
| Project II | ||
| a-2 | If the company applies the profitability index decision rule, which project should the firm accept? | ||||
|
| b-1 | What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | ||
| Project I | $ | |
| Project II | $ | |
| b-2 | If the company applies the NPV decision rule, which project should it take? | ||||
|
