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Firefox File Edit View History Bookmarks Tools Window Help e 98% L%), Sat 6:48 PM Atika Ishtiaq C : Oracle PeopleSoft Sign-in X Ghec canvas Goagle SearchX ion.com. × C Accounting question | Chegg.c x ?£ https://newconnect.mheducation.com/flow/ ? a Search Ch 11 Ex 11-10 6 Help Save & Exit Submit Saved Check my work Exercise 11-10 NPV and profitability index LO P3 25 points 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.) Projeo $(171,325) t A Project B (157,960) eBoak Initial investment Expeoted net cash Elows in yeari 53,000 59,000 87,295 78,400 59,000 25,000 57,000 61,000 76,000 33,000 Hint Ask Print 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 below RequiredA Required E For each alternative project compute the net present value. Project A Initial Investment 171,325 Prev 1 of 1 Next Hill

Explanation / Answer

Project A Initail investment: 171325 I = 8% Year cashflows PVF Present value 1 53000 0.925926 49074.07 2 59000 0.857339 50582.99 3 87295 0.793832 69297.59 4 78400 0.73503 57626.34 5 59000 0.680583 40154.41 Present value of inflows 266735 Present value of inflows 266735 Less: Initial investment 171325 Net present value 95410 Project B Initail investment: 157960 I = 8% Year cashflows PVF Present value 1 25000 0.925926 23148.15 2 57000 0.857339 48868.31 3 61000 0.793832 48423.77 4 76000 0.73503 55862.27 5 33000 0.680583 22459.25 Present value of inflows 198762 Present value of inflows 198762 Less: Initial investment 157960 Net present value 40802 Profitability Index Present value of Inflows   / Initial Investment      = Profitability Index Project A 266735 171325 1.56 Project B 198762 157960 1.26 Project A shall be selected.

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