3 Following is information on two alternative investments being considered by Jo

Question

3 Following is information on two alternative investments being considered by Jolee Company. The company requires a 6% return from its investments. (PV of $1, FV of S1. PVA of $1 and FVA of $1). (Use approprlate factor(s) from the tables provlded.) Project A Project $(189,325) C142,96e) Initial 1nvestment Expected net cash flows in year: points 48,809 47,800 86, 295 38,000 51,000 50,88e 77,8ee 19,eee eBock 62,2ee a. For each altenatlve 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? Print Complete this question by entering your answers in the tabs below. Reference For each alternative project compute the net present value. Intial Investment 188.325 t Values are Based Cash Inflow x PV FactorPresent Value t B Initial Investment 142,960 Cash Inflow x PW FactorPresent Value For each alternative project compute the profitability index, if the company can only select one project, which should it choose? Choose Numerator: Profitabiity index Project A Project B If the company can only select one project, which should it ch008e ? Required A

Explanation / Answer

Req A: Project A Initial Investment: $ 188325 Chart Value: I = 6% Year cash flows PVF Present values 1 48000 0.943396 45283.02 2 47000 0.889996 41829.83 3 86295 0.839619 72454.95 4 85400 0.792094 67644.8 5 62000 0.747258 46330.01 Ppresent value of inflows 273543 Less: Initial Investment 188325 Net Present value 85218 Project B Initial Investment: $ 142960 Chart Value: I = 6% Year cash flows PVF Present values 1 30000 0.943396 28301.89 2 51000 0.889996 45389.82 3 50000 0.839619 41980.96 4 77000 0.792094 60991.21 5 19000 0.747258 14197.91 Ppresent value of inflows 190862 Less: Initial Investment 142960 Net Present value 47902 Req B: PROFITABILITY INDEX Present value of Inflows   / Initial Investment   = Profitability Index Project A 273543 188325 1.45 Project B 190862 142960 1.34

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