Exercise 25-10 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 $(176,325) Project B $(150,960) Initial investment Expected net cash flows in year: 1 2 3 4 5 40,000 48,000 75,295 93,400 61,000 36,000 57,000 50,000 70,000 25,000 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 $ 176,325 Chart Values are Based on: Year Cash Inflow X PV Factor Present Value 1 2 = 3 = 4 5 Project B Initial Investment $ 150,960 Year Cash Inflow X PV Factor Present Value 1 2 = 3 = 4 = 5 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 1 Choose Denominator: Choose Numerator: = Profitability Index Profitability index / Project A Project B If the company can only select one project, which should it choose