1A: for each alternative project compute the net present value 1B for each alter

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1A: for each alternative project compute the net present value 1B for each alternative project compute the profitability index
Question 2 assume if the company can only select one project , which should it choose History Bookmarks Window Help lectures.mhhe.com Module 7 - Quiz-Chapter 24 tableb.1JPG 949-569 pixels BLE B.1 esent Value of 1 Rate Periods 3% 5% 6% 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 0.9803 0.9612 09426 0.9246 0.9070 09900 08734 0.8573 0.8417 08264 0.7972 07561 0.9706 0.9423 0.915 0.8890 08638 08396 0.8163 0.7938 0.7722 0.7513 0.7118 0.6575 0.9610 09238 095 0.8548 08227 0.7921 0.7629 0.7350 0.7084 0.6830 06355 05718 09S15 0.9057 08626 08219 0.7835 07473 0.710.6806 0.6499 0.5209 0.5674 0.4972 0.9420 0.8880 0.8375 0.7903 0.7462 07050 0.6663 0.6302 0.5963 0.5645 05066 04323 0.9327 0.8706 0813 0.7599 07107 0.6651 0.6227 0.5835 0.5470 05132 04523 03759 0.9235 08535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 05019 0.4665 04039 0.3269 09143 0.8368 07664 0.7026 0.6446 0.5919 0.5439 0.5002 04604 0.4241 0.3606 0.2843 0.905308203 07441 06756 0.61 39 oss84 05083 0.4632 04224 0.38ss 0.3220 0.2472 11 08963 ,08043 07224 0.6496 0.5847 05268 04751 0.4289 0.3875 0.3505 0.2875 0.2149 0 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 03186 02567 0.1869 08787 0.7730 06810 0.6006 05303 0.4688 0.4150 03677 0.3262 02897 02292 0.1625 0.8700 0.7579 0.6611 05775 0.505 04423 0.3878 0.3405 02992 0.2633 0.2046 0.1413 0.8613 0.74300.64190.5553 0.4810 04173 03624 03152 02745 02394 0.1827 .1229 0.8528 0.7284 06232 05339 0458 0.3936 0.3387 0.2919 0.2519 0.2176 0.163 0.1069 0.8444 0.7142 0600 05134 04363 0.3714 0.3166 0.2703 02311 0.1978 0.1456 00929 0.8360 0.7002 05874 0.4936 04155 03503 0.2959 02502 02120 .1799 0.1300 00808 0.8277 0.6864 05703 04746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 01161 00703 08195 06730 05537 04564 0.3769 03118 0.2584 0.2145 0.1784 0.146 0.1037 00611 0.7798 0.6095 04776 03751 02953 0.2330 0.1842 0.1460 0.1160 00923 00588 00304 0.7419 0552104120 03083 02314 0.1741 0.1314 00994 00754 00573 00334 0015 0.7059 05000 0355402534 01813 0.1301 0.0937 00676 00490 00356 00189 00075 06717 04529 03066 0.2083 0.1420 0.0972 0.0668 00460 00318 00221 00107 00037

Explanation / Answer

Net Present Value And Internal Rate Of Return - Profitability Index. Aprofitability index attempts to identify the relationship between the costs and benefits of a proposed project. The profitability index iscalculated by dividing the present value of the project's future cash flows by the initial investment.

Project -- A Initial Investment 188325 Year Cash Flow Table Factor @ 10% Present Value 1 55000                 0.9091      50,000.0000 2 51000                 0.8264      42,148.7603 3 76295                 0.7513      57,321.5627 4 83400                 0.6830      56,963.3222 5 70000                 0.6209      43,464.4926 Total Discounted Cash Flows              249,898 NPV                 61,573 NPV = PV of Cash Inflow - Initial Investment Project -- B Initial Investment 149960 Year Cash Flow Table Factor @ 10% Present Value 1 38000                 0.9091      34,545.4545 2 55000                 0.8264      45,454.5455 3 64000                 0.7513      48,084.1473 4 74000                 0.6830      50,542.9957 5 28000                 0.6209      17,385.7970 Total Discounted Cash Flows              196,013 NPV                 46,053 Calculation of Profitability Index

Net Present Value And Internal Rate Of Return - Profitability Index. Aprofitability index attempts to identify the relationship between the costs and benefits of a proposed project. The profitability index iscalculated by dividing the present value of the project's future cash flows by the initial investment.

Profitability Index Project - A (249898/188325)                 1.3270 Project - B (196013/149960) 1.3071 Decision   -   Project - A Since Profitability Index is high in Project - A compared to Project - B

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