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Following is information on two alternative investments being considered by Tiger Co. The company requires a 4% return from its investments. (PV of $1, FV
Following is information on two alternative investments being considered by Tiger Co. 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 | $ | (130,000 | ) | $ | (220,000 | ) | ||||
Expected net cash flows in year: | ||||||||||
1 | 50,000 | 97,500 | ||||||||
2 | 60,500 | 87,500 | ||||||||
3 | 85,500 | 77,500 | ||||||||
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?
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