Profitability index decision rule, Finance Basics

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Profitability index decision rule

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

Year Cash Flow (I) Cash Flow (II)

0 -53000 -16000

1 27000 9100

2 27000 9100

3 27000 9100

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 your answers in (a) and (b) are different.

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Finance Basics: Profitability index decision rule

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Finance Basics: Profitability index decision rule

Reference No:- TGS052218

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : Determining the project net investment outlay

Q : Analysis of goodwill

Q : Evaluating replacement cost

Q : Prepare all necessary entries in general journal form

Q : Profitability index decision rule

Q : Net profit and cash flow from the sale for the year

Q : Unlevered beta of ang enterprises

Q : Calculating discount rate-capm

Q : Statement of change in stockholders equity

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Request for Solution File

Ask an Expert for Answer!!

Finance Basics: Profitability index decision rule

Reference No:- TGS052218

Recent Questions Asked Finance Basics

Q : Determining the project net investment outlay

Q : Analysis of goodwill

Q : Evaluating replacement cost

Q : Prepare all necessary entries in general journal form

Q : Profitability index decision rule

Q : Net profit and cash flow from the sale for the year

Q : Unlevered beta of ang enterprises

Q : Calculating discount rate-capm

Q : Statement of change in stockholders equity

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