Question
Exercise 26-10 (Static) Net present value, unequal cash flows, and profitability index LO P3 Following is information on two alternative investment projects being considered by
Exercise 26-10 (Static) Net present value, unequal cash flows, and profitability index LO P3
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% 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 | $ (80,000) | $ (120,000) |
| Net cash flows in: | ||
| Year 1 | 25,000 | 60,000 |
| Year 2 | 35,500 | 50,000 |
| Year 3 | 60,500 | 40,000 |
a. Compute each projects net present value. b. Compute each projects profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index?
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
16th Edition
78110939, 978-0078110931
