Following is information on two alternative investments being considered by Tiger Co. The company requires a 12% 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 ) Expected 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. If the company can choose only one project, which should it choose?

Compute each projects net present value.

	Net Cash Flows	Present Value of 1 at 12%	Present Value of Net Cash Flows
Project X1
Year 1	$25,000
Year 2	35,500
Year 3	60,500
Totals	$121,000		$0
Amount invested
Net present value			$0
Project X2
Year 1	$60,000
Year 2	50,000
Year 3	40,000
Totals	$150,000		$0
Amount invested
Net present value			$0

Profitability Index
	Choose Numerator:	/	Choose Denominator:	=	Profitability Index
		/		=	Profitability index
Project X1					0
Project X2					0
If the company can choose only one project, which should it choose?