You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 10 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) ($46,000 Investment)
Project Y (Slow-Motion Replays of Commercials) ($80,000 Investment)
Year Cash Flow Year Cash Flow
1 $ 30,000 1 $ 40,000
2 28,000 2 33,000
3 20,000 3 34,000
4 18,600 4 36,000
a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Calculate the profitability index for project Y.