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" |
11-10
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 of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B $ (151,960) Initial investment Expected net cash flows in year: (173,325) 51,000 55,000 72,295 78,400 66,000 36,000 59,000 65,000 85,000 32,000 a. For each alternative project compute the net present value b. For each...
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
$
(180,325
)
$
(146,960
)
Expected net cash flows in year:
1
35,000
35,000
2
49,000
58,000
3
89,295
54,000
4
82,400
76,000
5
61,000
36,000
a. For each alternative project...
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 $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A $ (186,325) Project B $ (151,960) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 50,000 53,000 83,295 80,400 71,000 27,000 60,000 64,000 68,000 30,000 a. For each alternative...
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 12% retur 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 $(180,325) Project B $(145,960) Initial investment Expected net cash flows in year: Hm #on 47,000 57,900 81,295 77,400 69,000 37,000 60,000 49,000 74,000 32,000 a. For each alternative project...
Exercise 24-12 Net present value, profitability index LO P3 Following is information on two alternative investments being considered by Tiger Co. The company requires an 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 x1 Project x2 Initial investment $(108,000) $(176,000) Expected net cash flows in year: 39,000 81,000 49,500 71,000 74,500 61,000 1 2 3 a. Compute each project's net present value....
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 of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B Initial investment $ (178,325 ) $ (144,960 ) Expected net cash flows in: Year 1 53,000 36,000 Year 2 59,000 52,000 Year 3 92,295 52,000 Year 4 95,400 70,000 Year 5 57,000 31,000 a. For...
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 of $1. and FVA of $1] (Use appropriate factor(s) from the tables provided.) Project A Project Initial investment $(188,325) Expected net cash flows in 3(142,960) Year 1 50,00 41,000 Year 2 45,000 45,000 Year 82,295 49,00 Year 4 86,400 69,000 Year 5 68,000 32, eee a. For each alternative project compute the...
FQllowing is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from itslinvestments. (PV of $1. FV of $1,. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A $(179,325) Project B $(158,960) Initial investment Expected net cash flows in year 1 43,000 42,000 76,295 82,400 65,000 33,000 48,000 51,000 80,000 23,000 2 a. For each alternative project compute the net present value b. For each alternative...
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Exercise 11-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% investments. (PV of S1, FV of S1. PVA of S1. and EVA of 50 (Use appropriate factorís) from the tables provided.) return from Initial investment Expected net cash flovs in year Project A NProject B (187,325) (143,960) 46,000 59,000 73,295 80,400 73,000 34,000 43,000 55,000...
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 $(184,325) Project B $(157,960) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 41,000 41,000 89, 295 80,400 55,000 42,000 45,000 64,000 75,000 38,000 a. For each alternative project...