Suppose, your company is considering two mutually exclusive projects, X and Y whose costs and...
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Suppose, your company is considering two mutually exclusive projects, X and Y whose costs and cash flows are shown below. Assume that the projects are equally risky, and their cost of capital is 12%. 0 1 2 Year Project x Project Y $(5,000) $(5,000) 1,000 4,500 1,500 1,500 2,000 1,000 4,000 500 What are the profitability index (PI) of Project X (PIX) and Project Y (PIY). If the projects are independent, which project would you choose? 3 4 OPlx = 1.11 ; Ply = 1.125; Reject both projects. OPIX = 1.21; Ply = 1.25; Accept both projects. Plx = 1.18; Ply = 1.15; Accept project X. = OPlx = 1.10; Ply = 1.20 ; Accept project Y. =
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