Following is information on two alternative investments being considered by Jolee Company. 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 A $(186, 325) Project B $(151,960) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 50,000 52,000 80,295 90,400 60,000 31,000 51,000 54,000 78,000 24,000 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the net present value. 186,325 100, Project A Initial Investment $ Chart Values are Based on: - 12 % Cash Year Inflow 50,000 52,000 80,295 X 90,400 60,000 X PV Factor 0.8929 0.7972 0.7118 0.6355 0.8066 X = = Present Value 44,642 41,454 57,154 57,449 48,396 249,095 = $ $ Present value of cash inflows Present value of cash outflows Net present value 249,095 186,325 62,767 % $ Project B Initial Investment Year X Cash Inflow 31,000x 51,000 54,000 78,000 24,000 151,960 PV Factor 0.8929 0.7972 0.7118 0.6355 0.8066 Present Value 27,679 40,657 38,437 49,569 19,358 175,700 X X x $ Present value of cash inflows Present value of cash outflows Net present value 175,700 151,960 23,740 X $ Following is information on two alternative investments being considered by Tiger Co. The company requires an 8% 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 $(81,000) Project x2 $ (124,000) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 29,000 39,500 64,500 66,000 56,000 46,000 a. Compute each project's net present value. b. Compute each project's profitability index. If the company can choose only one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B Compute each project's profitability index. If the company can choose only one project, which should it choose? - Profitability Index Choose Numerator: 1 Choose Denominator: Present value of net cash flows / Initial investment Project X1 111,917 1 $ 81,000 Project X2 | $ 21,636 1 $ 124,000 If the company can choose only one project, which should it choose? Profitability Index Profitability index 1.38 0.17 Project X1
