Problem 24-4A (Algo) Applying net present value and profitability index LO P3

Rowan Company is considering two alternative investment projects. Each requires a $252,000 initial investment. Project A is expected to generate net cash flows of $62,000 per year over the next six years. Project B is expected to generate net cash flows of $52,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Compute each projects net present value. 2. Compute each projects profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index?

Compute each project's net present value. (Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar.) Compute each project's profitability index. (Do not round intermediate values. Enter your answers rounded to the nearest whole dollar.) Complete this question by entering your answers in the tabs below. If the company can choose only one project, which should it choose, based on profitability index