Wildhorse Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $523,000, has an expected useful life of 12 years and a salvage value of zero, and is expected to increase net annual cash flows by $72,100. Project B will cost $358,000, has an expected useful life of 12 years and a salvage value of zero, and is expected to increase net annual cash flows by $50,400. A discount rate of 7% is appropriate for both projects. Click here to view the factor table.

Compute 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 eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value - Project A		$enter a dollar amount rounded to 0 decimal places
Profitability index - Project A		enter the profitability index rounded to 2 decimal places
Net present value - Project B		$enter a dollar amount rounded to 0 decimal places
Profitability index - Project B		enter the profitability index rounded to 2 decimal places

Which project should be accepted based on Net Present Value?

select a project Project BProject A should be accepted.

Which project should be accepted based on profitability index?

select a project Project BProject A should be accepted.