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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 $(183,325) Project B $(151,960) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 45,000 49,000 82,295 80,400 66,000 42,000 44,000 51,000 66,000 37,000 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? For each alternative project compute the net present value. Project A Initial Investment $ 183,325 Chart Values are Based on: 81% Year Cash Inflow ? PV Factor Present Value 1 2 3 4 5 Project B $ 151,960 Initial Investment Year Cash Inflow ? PV Factor Present Value 1 = 2 3 4 5 Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Profitability Index Choose Numerator: Choose Denominator: Profitability Index Profitability index 0 Project A Project B If the company can only select one project, which should it choose? 0

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