Question
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (PV of $1, FV
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% 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 | Project B | |||||||||
| Initial investment | $ | (189,325 | ) | $ | (144,960 | ) | ||||
| Expected net cash flows in: | ||||||||||
| Year 1 | 39,000 | 43,000 | ||||||||
| Year 2 | 55,000 | 48,000 | ||||||||
| Year 3 | 91,295 | 66,000 | ||||||||
| Year 4 | 85,400 | 68,000 | ||||||||
| Year 5 | 72,000 | 39,000 | ||||||||
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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Fundamentals of Financial Management
Authors: Eugene F. Brigham
Concise 9th Edition
978-1305635937
