Question 4 The Robb Computer Corporation is trying to choose between the following two mutually
exclusive design projects::
Year Cash flow (I) Cash flow (II)
0 -30,000 -12,000
1 18,000 7,500
2 18,000 7,500
3 18,000 7,500
(a) If the required return is 10 percent and Robb Computer applies the PI decision rule, which
project should the firm accept?
(b) If the company applies the NPV decision rule, which project should it take?
(c) Explain why your answers in (a) and (b) are different.