Exercise 24-11 Net present value, profitability index LO P3

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
Year 2			58,500					84,500
Year 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?