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)

Note: Use appropriate factor(s) from the tables provided.

	Project X1	Project X2
Initial investment	$ (90,000)	$ (140,000)
Net cash flows in:
Year 1	30,000	67,500
Year 2	40,500	57,500
Year 3	65,500	47,500

1. Compute each projects net present value.
2. Compute each projects profitability index.
3. If the company can choose only one project, which should it choose on the basis of profitability index?

• Required A
• Required B
• Required C

Compute each projects net present value. Note: Round your final answers to the nearest dollar.

	Net Cash Flows	Present Value of 1 at 4%	Present Value of Net Cash Flows
Project X1
Year 1	$30,000
Year 2	40,500
Year 3	65,500
Totals	$136,000		$0
Initial investment			90,000
Net present value			$(90,000)
Project X2
Year 1	$67,500
Year 2	57,500
Year 3	47,500
Totals	$172,500		$0
Initial investment			140,000
Net present value			$(140,000)

Profitability Index
	Numerator:	/	Denominator:	=	Profitability Index
	Present value of net cash flows	/	Initial investment	=	Profitability index
Project X1			$90,000	=	0.00
Project X2			$140,000	=	0.00

If the company can choose only one project, which should it choose on the basis of profitability index?