Question
jonczyk Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $476,000, has an expected useful life of 13 years and
jonczyk Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $476,000, has an expected useful life of 13 years and a salvage value of zero, and is expected to increase net annual cash flows by $67,000. Project B will cost $319,000, has an expected useful life of 13 years and a salvage value of zero, and is expected to increase net annual cash flows by $47,000. A discount rate of 8% is appropriate for both projects. Click here to view PV table. Calculate the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.52. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124.) Project A Project B Net present value $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places Profitability index enter the index rounded to 2 decimal places enter the index rounded to 2 decimal places Which project should be accepted based on net present value? select a project based on its net present value should be accepted. Which project should be accepted based on profitability index? select a project based on its profitability index should be accepted.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started