The Angry Bird Corporation is trying to choose between the following two mutuall
ID: 2651497 • Letter: T
Question
The Angry Bird Corporation is trying to choose between the following two mutually exclusive design projects:
If the required return is 12 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161))
If the company applies the profitability index decision rule, which project should the firm accept?
What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
If the company applies the NPV decision rule, which project should it take?
The Angry Bird Corporation is trying to choose between the following two mutually exclusive design projects:
Explanation / Answer
Answer:a-1 Profitibility Index
Project I=$79200/62000=1.2774
Project II=23520/18200=1.292
Answer:a-2 Project II should be accepted because it has higher Profitibility index.
Answer:b-1 NPV
Project I= PVCI - PVCO
=(33000*2.40)-62000
=$17200
Project II= (9800*2.40)-18200
=$5320
Answer:b-2 ENPV
Project I=$17200/2.40=$7167
Project II=$5320/2.40=$2217
So, Project I should be accepted because It have higher Equivalent NPV.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.