Question
7 Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (PV of $1,
7 Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Project A $(184,325) Project B $(145,960) 36,000 36,000 41,000 55,000 74,295 60,000 86,400 66,000 69,000 33,000 a. For each alternative project compute the net present value. b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the net present value. Project A $ 184,325 Initial Investment Chart Values are Based on: 10 % Year Cash Inflow X PV Factor = Present Value 1 36,000 x = 7 12345 41,000 x 74,295 x 86,400 x 69,000 x Present value of cash inflows Present value of cash outflows Net present value Initial Investment Project B $ 145,960 Year Cash Inflow PV Factor 1 36,000 x = 2 55,000 x = 3 60,000 x = 4 66,000 x 5 33,000 x Present value of cash inflows Present value of cash outflows Net present value Present Value 7 b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Profitability Index Choose Numerator: Choose Denominator: = Profitability Index Present value of net cash flows Initial investment = Profitability index Project A Project B 0 0 If the company can only select one project, which should it choose?
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