Exercise 24-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company. The company requires a 12% 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 $(189, 325) Project B $(144,960) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 47,000 42,000 87,295 86,400 61,000 31,000 61,000 58,000 83,000 22,000 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 $ 189,325 Chart Values are Based on: i = % Year Cash Inflow x PV Factor 1 Present Value N = 3 4 5 = Initial Investment Year Cash Inflow Project B $ 144.960 X PV Factor Present Value 1 11 2 3 3 = 4 11 5 11 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: 1 Project A Project B If the company can only select one project, which should it choose? Profitability Index Profitability index 0 0