Gourmet Royal's management board is in a dilemma as to which project to accept from their R&D department. Project X can be successfully developed at 80% probability and its market success at 60%. Annual sales are estimated at 500,000 pounds for the next nine years. The management believes that they can sell their product to retailers at $.75 per pound, providing a profit of $.45 per pound. The process technology costs $20,000 and $2000 respectively.
Project Y on the other hand has a 90% development rate and success rate of 70% with annual sales of 550,000 pounds for the next four years. It cost $.50 per pound and can be sold for $1.00 a pound. Process costs are $2000 and new machines cost $50,000.
The workforce needed for X is 5 skilled workers at $15.00 per hour, 50 weeks per year, and for Y to be 7 full time operators at $15.00 per hour for 50 weeks per year.
Question: using the PVI formula, showing detailed calculations and analysis, recommend to the management which project you believe would be more beneficial to them.