Question
Following is information on two alternative investments being considered by Jayjay Company Inc. The company requires a 10% return from its investments. (PV of $1,FV
Following is information on two alternative investments being considered by Jayjay Company Inc.
The company requires a 10% return from its investments. (PV of $1,FV of $1,PVA of $1andFVA of $1).(Use appropriate factor(s) from the tables provided.)
Project A Project B
Initial investment $(189,325) $(148,960)
Expected net cash flows in year:Y1:37,000 33,000
Y2:56,000 55,000
Y3:76,295 63,000
Y4:87,400 78,000
Y5:71,000 36,000
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?
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