NPV and Profitability Index. Dahlia Manufacturing has the following two possible projects. The required return is 12 percent.
Year | Project Y | Project Z |
0 | −$27,000 | −$50,000 |
1 | 13,000 | 22,000 |
2 | 11,400 | 21,000 |
3 | 13,800 | 20,000 |
4 | 9,400 | 19,000 |
a. What is the profitability index for each project?
b. What is the NPV for each project?
c. Which, if either, of the projects should the company accept?
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