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Following is information on two alternative investments being considered by Tiger Co. The company requires a 6% return from its investments. (PV of $1, FV
Following is information on two alternative investments being considered by Tiger Co. The company requires a 6% 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 | $ | (94,000 | ) | $ | (148,000 | ) | ||||
Expected net cash flows in year: | ||||||||||
1 | 32,000 | 70,500 | ||||||||
2 | 42,500 | 60,500 | ||||||||
3 | 67,500 | 50,500 | ||||||||
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?
Compute each project's net present value. Net Cash Present Value Present Value of Flows of 1 at 6% Net Cash Flows $ 0 $ 0 $ 0 Project X1 Year 1 Year 2 Year 3 Totals Amount invested Net present value Project X2 Year 1 Year 2 Year 3 Totals Amount invested Net present value $ 0 $ 0 $ 0 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: 1 Project X1 Project X2 If the company can choose only one project, which should it choose? Profitability Index Profitability index 0 0
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