Exercise 11-10 NPV and profitability index LO P3 Following is information on two

Question

Exercise 11-10 NPV and profitability index LO P3 Following is information on two alternative investments being considered by Jolee Company. The compa y requires a 10% return f m its investments. (PV of $1, FV of $1. PVA of S1. and FVA of $) (Use appropriste factor(s) from the tables provided.) Project WEH!! !!Project Initial investment Expected net cash flows in year: S(279,325)$(146,968) 38,880 56,80 98,295 82,408 68,888 27,808 61,008 56,800 72,000 34,938 a. For each alternative project compute the net present value b. For each alternative project compute the profitablity 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

Explanation / Answer

Project-A Initial Investment: 179325 I =10% Year cashinflow PVF Present Value 1 38000 0.909091 34545.45 2 56000 0.826446 46280.99 3 90295 0.751315 67839.97 4 82400 0.683013 56280.31 5 68000 0.620921 42222.65 Present value of cash inflows 247169 Present value of cash inflows 247169 Less: Initial Investment 179325 NPV 67844 Project-B Initial Investment: 179325 I =10% Year cashinflow PVF Present Value 1 27000 0.909091 24545.45 2 61000 0.826446 50413.22 3 56000 0.751315 42073.63 4 72000 0.683013 49176.97 5 34000 0.620921 21111.32 Present value of cash inflows 187321 Present value of Inflows 187321 Less: Initial Investment 179325 NPV 7996 PROFITABILITY INDEX Present value of Inflows      / Present value of Investment   = Profitability Index Project-A 247169 179325 1.378 Project-B 187321 179325 1.045

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.