You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 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) ($54,000 Investment) Project Y (Slow-Motion Replays of Commercials) ($74,000 Investment)
Year Cash Flow Year Cash Flow
1 $27,000 1 $37,000
2 25,000 2 30,000
3 25,000 3 31,000
4 23,600 4 33,000

Required:
a. Calculate the profitability index for project X.
b. Calculate the profitability index for project Y.
c. Which project would you select based on the profitability index?