Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% return from its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Project X1

Project X2

Initial investment

$

(126,000

)

$

(212,000

)

Expected net cash flows in year:

1

48,000

94,500

2

58,500

84,500

3

83,500

74,500

1(a) Compute each projects net present value.

	Net Cash Flows	Present Value of 1 at 7%	Present Value of Net Cash Flows
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

1(b) Compute each projects profitability index.

Profitability Index
	Choose Numerator:	/	Choose Denominator:	=	Profitability Index
		/		=	Profitability index
Project X1
Project X2

2.

If the company can choose only one project, which should it choose?

	Project X1
	Project X2