FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% 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 )     $ (155,960 )  
Expected net cash flows in:                    
Year 1     35,000         27,000    
Year 2     54,000         43,000    
Year 3     77,295         61,000    
Year 4     91,400         77,000    
Year 5     65,000         20,000    
 


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 $181,325    
Chart Values are Based on:
i =   %  
Year Cash Inflow x PV Factor = Present Value
1       =  
2       =  
3       =  
4       =  
5       =  
   
 
   
   
   
 
Project B
Initial Investment $155,960  
Year Cash Inflow x PV Factor = Present Value
1       =  
2       =  
3       =  
4       =  
5       =  
   
 
   
   
   
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