9-10

Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% 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		$	(126,000	)			$	(212,000	)
Expected net cash flows in year:
1			48,000					94,500
2			58,500					84,500
3			83,500					74,500

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?

Following is information on two alternative investments being considered by Tiger Co. The company requires a 8% return from its investments.

	Project X1					Project X2
Initial investment		$	(118,000	)			$	(196,000	)
Expected net cash flows in year:
1			44,000					88,500
2			54,500					78,500
3			79,500					68,500

Compute the internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project is acceptable. (Round your answers to 2 decimal places.)

Required A Required B Compute each project's net present value. (Round your final answers to the nearest dollar.) Net Cash Present Value Present Value of of 1 at 7% Net Cash Flows 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 Required ARequired B Compute each project's profitability index. If the company can choose only one project, which should it choose? 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? IRR Acceptable? Project X1 Project X2