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 $ (172,325 ) $ (146,960 ) Expected net cash flows in: Year 1 50,000 31,000 Year 2 43,000 44,000 Year 3 89,295 60,000 Year 4 90,400 77,000 Year 5 54,000 33,000 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?
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 $ (172,325 ) $ (146,960 ) Expected net cash flows in: Year 1 50,000 31,000 Year 2 43,000 44,000 Year 3 89,295 60,000 Year 4 90,400 77,000 Year 5 54,000 33,000 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?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 11P
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Following is information on two alternative investments being considered by Jolee Company. The company requires a 8%
| Project A | Project B | |||||||||
| Initial investment | $ | (172,325 | ) | $ | (146,960 | ) | ||||
| Expected net |
||||||||||
| Year 1 | 50,000 | 31,000 | ||||||||
| Year 2 | 43,000 | 44,000 | ||||||||
| Year 3 | 89,295 | 60,000 | ||||||||
| Year 4 | 90,400 | 77,000 | ||||||||
| Year 5 | 54,000 | 33,000 | ||||||||
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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