The Webex Corporation is trying to choose between the following two mutually exclusive design projects:  Year Net Cash Flow Project - I ($) Net Cash Flow Project - II ($) 0  (53,000) (16,000) 1 27000 9100 2 27000 9100 3 27000 9100 (a) If the required return is 10% and the company applies the Profitability Index decision rule, which project should the firm accept? (b) If the company applies the Net Present Value decision rule, which project should it take? (c) Explain why your answers in (a) and (b) are different (d) Calculate the Internal Rate of Return of both projects.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The Webex Corporation is trying to choose between the following two mutually exclusive design
projects: 

Year Net Cash Flow Project - I
($)
Net Cash Flow Project - II
($)
(53,000) (16,000)
1 27000 9100
2 27000 9100
3 27000 9100

(a) If the required return is 10% and the company applies the Profitability Index decision rule,
which project should the firm accept?
(b) If the company applies the Net Present Value decision rule, which project should it take?
(c) Explain why your answers in (a) and (b) are different
(d) Calculate the Internal Rate of Return of both projects. 

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