9.

Following is information on two alternative investments being considered by Tiger Co. The company requires a 5% 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.)

	Project X1					Project X2
Initial investment		$	(82,000	)			$	(124,000	)
Expected net cash flows in:
Year 1			26,000					61,500
Year 2			36,500					51,500
Year 3			61,500					41,500

a. Compute each projects net present value. b. Compute each projects profitability index. If the company can choose only one project, which should it choose?

	Net Cash Flows	Present Value of 1 at 5%	Present Value of Net Cash Flows
Project X1
Year 1
Year 2
Year 3
Totals
Amount invested
Net present value
Project X2
Year 1
Year 2
Year 3
Totals
Amount invested
Net present value

Profitability Index
	Choose Numerator:	/	Choose Denominator:	=	Profitability Index
		/		=	Profitability index
Project X1
Project X2
If the company can choose only one project, which should it choose?