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TABLE B.2 Future Value of 1 Rate 2% 3% 5% 6% 7% 8% 0% 12% 15% 1.0000 0000 1.1000 1200 1.2100 12544 1.0303 1.0612 1.0927 1249 1.1576 1.1910 1.2250 1.2597 1290 13310 1.4049 1.5735 1.6105 1.7623 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0100 .0200 1.0300 1.0400 0500 1.0201 .0404 1.0609 1.0816 1.1025 11236 .1449 .1664 1.1881 1.0700 1.0800 1.0900 1.0406 .0824 1.1255 11699 1.2155 1.2625 .3108 3605 1.4116 1.0510 1.1041 .1593 1.2167 1.2763 1.3382 .4026 1.4693 5386 1.0615 1.1262 1.1941 1.2653 .3401 1.4185 1.5007 1.5869 1.6771 17716 1.97 1.0721 1.1487 1.2299 1.3159 1.4071 1.5036 1.6058 1.7138 18280 1.1500 1.3225 1.5209 1.7490 2.0114 2.3131 .6600 1.4641 7 1.9487 2.2107 1.0829 1.1717 1.2668 1.3686 1.4775 1.5938 1.7182 18509 1.9926 2.1436 2.4760 1.0937 1.1951 1.3048 1.4233 1.5513 16895 1.8385 1.9990 2.1719 2.3579 2.7731 1.1046 1.2190 1.3439 1.4802 1.6289 1.7908 1.9672 2.1589 2.3674 2.59373.1058 1.1157 1.2434 1.3842 1.5395 1.7103 18983 2.1049 2.3316 2.5804 2.85313.4785 1.1268 1.2682 1.4258 1.6010 1.7959 2.0122 2.2522 2.5182 2.8127 3.1384 3.8960 1.1381 1.2936 1.4685 1.6651 1.8856 2.1329 2.4098 2.7196 3.0658 3.45234.3635 1.1495 .3195 1.5126 1.7317 1.9799 2.2609 2.5785 2.9372 3.3417 3.7975 4.8871 1.1610 1.3459 1.5580 1.8009 2.0789 2.3966 2.7590 3.1722 3.6425 4.1772 5.4736 1.1726 13728 1.6047 1.8730 2.1829 2.5404 .9522 3.4259 3.9703 4.5950 6.1304 1.1843 1.4002 1.6528 1.9479 2.2920 2.6928 3.1588 3.7000 4.3276 5.0545 6.8660 5.5599 7.6900 1.2081 1.4568 1.7535 2.1068 2.5270 3.0256 3.6165 4.3157 5.1417 6.1159 8.6128 1.2202 1.4859 1.8061 2.1911 2.6533 3.2071 3.8697 4.6610 5.6044 6.7275 9.6463 1.2824 1.6406 2.0938 2.6658 3.3864 4.2919 5.4274 6.8485 8.6231 10.83477.0001 3.5179 4.6524 5.3503 6.1528 7.0757 8.1371 9.3576 10.7613 12.3755 14.2318 16.3665 32.9190 1.3478 18114 2.4273 3.2434 4.3219 5.7435 6123 10.0627 13.2677 17.4494 29.9599 66.2118 1.4166 9999 2.8139 3.9461 5.5160 7.6861 10.6766 .7853 20.4140 28.1024 52.7996 133.1755 1.4889 2.2080 3.2620 4.8010 7.0400 10.2857 4.9745 21.7245 31.4094 45.2593 93.0510 267.8635 12 13 1.1961 1.4282 1.7024 2.0258 2.4066 2.8543 3.3799 3.9960 4.7171 20 30 40 Used to compute the future value of a known present amount. For example: What is the accumulated value of S3 00 invest today at 8% co n ounded quarter for 5 years? Using the factors of n 20 and i-2% (20 quarterly periods and a quarterly interest rate of 2%), the factor is l 4859. The accumulated value is S4 457.70 (53,000 x L4859TABLE B.4 f= [(1 + i)-1Vi Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0000 .0000 1.0000 10000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000 2.1200 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 12.2997 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 13.0210 13.5795 14.7757 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 4.5061 4.5731 4.6410 4.7793 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 7.5603 18.5312 20.6546 24.3493 12.6825 13.4121 14.1920 15.0258 15.9171 16.8699 17.8885 18.9771 20.1407 21.3843 24.1331 12 13 13.8093 14.6803 15.6178 16.6268 17.7130 18.8821 20.1406 21.4953 22.9534 24.5227 28.0291 14 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 22.5505 24.2149 26.0192 27.9750 32.3926 40.5047 15 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 17 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 18 19 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 41.4463 46.0185 51.1591 63.4397 88.2118 20 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 25 30 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 215.7108 271.0244 431.6635 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 337.8824 442.5926 767.0914 1,779.0903 29.0017 34.3519 16.0969 7.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.9990 37.4502 41.3013 45.5992 55.7497 75.8364 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 881.1702 Used to calculate the future value of a series of equal payments made at the end of each period. For example: What is the future value of $4,000 per ye ar for 6 years assuming an annual interest rate of 8%. For lに6, İ= 8%), the FV factor is 7.3359. S4 000 per year for 6 years accumulates to $29,343.60 ($4,000 × 7.3359)TABLE B.3 Present Value of an Annuity of 1 Rat Periods 1% 2% 4% 5% 6% 7% 5% 10% 12% 15% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 1.9704 1.9416 1.9135 1.88611.8594 1.8334 8080 1.7833 1.759 .7355 16901 1.6257 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869 2.4018 2.2832 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 3.9927 3.8897 3.7908 3.6048 3.3522 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.1114 3.7845 5.3893 5.2064 5.0330 4.8684 4.5638 4.1604 7.6517 7.3255 7.0197 6.73276.4632 6.2098 5.9713 5.7466 5.5348 5.3349 4.9676 4.4873 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.3282 4.7716 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.6502 5.0188 7.1390 6.8052 6.4951 5.93775.2337 11.255 10.5753 9.95409.3851 8.8633 8.3838 7.9427 7.5361 7.1607 6.8137 6.1944 5.4206 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.4235 5.5831 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862 7.3667 6.6282 5.7245 13.8651 .8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607 7.6061 6.8109 5.8474 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 6.9740 5.9542 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.1196 6.0472 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.2497 6.1280 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.3658 6.1982 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.4694 6.2593 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 9.0770 7.8431 6.4641 25.8077 22.3965 19.6004 17.2920 5.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.0552 6.5660 29.4086 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546 10.5668 9.6442 8.1755 6.6166 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 8.2438 6.6418 4.8534 4.7135 4.57974.4518 4.3295 4.2124 4.1002 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 10.3676 9.7868 26 8.7605 8.3064 7.8869 7.4987 12 13 14 15 16 19 20 25 30 35 40 Used to calculate the present value of a series of equal payments made at the end of each period. For ex ample: What is the present value of $2,000 per year for 10 years assuming an annual interest rate of 9%. For (n= 10, i= 9%), the PV factor is 6.4177. $2,000 per year for 10 years is the equivalent of $12,835 today ($2,000 × 6.4177)Following is information on two alternative investments being considered by Jolee Company. The company requires a 12% return from its investments. (PV of $1. FV of $1. PVA f $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project B $ (174,325) 145,96e) Project A Initial investment Expected net cash flows in year: 41,000 41,000 88,295 78,400 60,000 40,000 52,000 64,000 71,000 28,000 4 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? Complete this question by entering your answers in the tabs belowRequired A Required B For each alternative project compute the net present value. Project A Initial Investment 174,325 Chart Values are Based on: YearCash Inflow x PV FactorPresent Value 4 Project B Initial Investment 145,960 Year Cash Inflowx PV FactorPresent Value 4 Required BRequired ARequired 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 Project A Project B If the company can only select one project, which should it choose? Required A

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Answer #1

Answer:

1(a) Calculation of NPV
Project A
Year Initial Investment + Amount ($) = Net Cash Flow($) * PV factor @ 12% = Present Value($)
0 $ (174,325) + =          -1,74,325 *            1.0000 =        -1,74,325
1 +       41,000 =              41,000 *            0.8929 =            36,607
2 +       41,000 =              41,000 *            0.7972 =            32,685
3 +       88,295 =              88,295 *            0.7118 =            62,847
4 +       78,400 =              78,400 *            0.6355 =            49,825
5 +       60,000 =              60,000 *            0.5674 =            34,046
NPV =            41,684
Project B
Year Initial Investment + = Net Cash Flow($) * PV factor @ 12% = Present Value($)
0 $ (145,960) + =          -1,45,960 *            1.0000 =        -1,45,960
1 +       40,000 =              40,000 *            0.8929 =            35,714
2 +       52,000 =              52,000 *            0.7972 =            41,454
3 +       64,000 =              64,000 *            0.7118 =            45,554
4 +       71,000 =              71,000 *            0.6355 =            45,122
5 +       28,000 =              28,000 *            0.5674 =            15,888
NPV =            37,772
1(b)
Profitability index (PI) = Present Value of cash inflow/ Present Value of cash outflow
Project A (PI) = 36,607+32,685+62,847+49,825+34,046/174,325=$216,009 /$174,325=1.24
Project B (PI) =35,714+41,454+45,554+45,122+15,888/145,960 = $183,732/$145,960 =1.26
Company Should choose Project "B"
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