Question

Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments, PV of $1. EV of $1. PVA of $1. and FVA O $(Use appropriate factor(s) from the tables provided) Project Project Initial investment 5[177,325) 5(151.960) Expected net cash flows in ytar: 50.000 53,000 42,00 76,205 56.000 94,400 56,000 20.000 21. 1 a. For each alternative project compute the nel 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 below. Required A Required B For each alternative project compute the net present value Project A Initial Investment $ 177 325 Chart Values are based on Year Cash Intlow PV Factor Present Value 1 2 3 4 5 S Initialwesen Yee 151 950 PV Factor 2 3 4 5

Answer 1

х Answer to Requirement A. Project A Initial Investment 177,325 Chart Values are Based on: i = 10% Year Cash Inflow PV Factor 1 50,000 x 0.9091 2 53,000 x 0.8264 3 76,295 x 0.7513 4 94,400 x 0.6830 5 70,000 x 0.6209 Present Value of Cash Inflows Present Value 45,455 43,799 57,320 64,475 43,463 254,513 = Present Value of Cash Inflows Present Value of Cash Outflows Net Present Value 254,513 -177,325 77,188

х Project B Initial Investment 151,960 Chart Values are Based on: i = 10% Year Cash Inflow PV Factor 1 38,000 x 0.9091 2 42,000 x 0.8264 3 56,000 x 0.7513 4 66,000 x 0.6830 5 21,000 x 0.6209 Present Value of Cash Inflows = = Present Value 34,546 34,709 42,073 45,078 13,039 169,444 li Present Value of Cash Inflows Present Value of Cash Outflows Net Present Value 169,444 -151,960 17,484

1 Answer to Requirement B Profitability Index Choose Choose = Profitability Index Numerator Denominator Present Value of / Initial Investment = Profitability Index Net Cash Inflows Project A 254513 / 177325 1.44 Project B 169444 151960 1.12 If the Company can only select one project, which should it choose? Project A