Exercise 11-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% 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 A Project B Initial investment $ (183,325 ) $ (146,960 ) Expected net cash flows in: Year 1 43,000 41,000 Year 2 44,000 51,000 Year 3 88,295 53,000 Year 4 85,400 79,000 Year 5 61,000 30,000 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?

Required A Required B For each alternative project compute the net present value. Project A Initial Investment $ 183,325 Chart Values are Based on: i = % Year Cash Inflow X PV Factor Present Value 1 2 3 = 4 5 Initial Investment Project B $ 146,960 PV Factor Year Cash Inflow X = Present Value 1 2 = 3 4 5