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Homework answers / question archive / Exercise 24-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company

Exercise 24-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company

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Exercise 24-10 NPV and profitability index LO P3

Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% 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 A Project B
Initial investment   $ (181,325 )     $ (159,960 )  
Expected net cash flows in year:                    
1     48,000         35,000    
2     44,000         47,000    
3     85,295         63,000    
4     93,400         84,000    
5     73,000         28,000    
 


a. For each alternative project compute the net present value.
b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?

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