my work Following is information on two alternative investments being considered
ID: 2533230 • Letter: M
Question
my work Following is information on two alternative investments being considered by Jolee Company. The company requires a 12% retur its investments. (PV of S1, EV of $1, PVA of $1, and EVA ot S1) (Use appropriate factor(s) from the ta n from ProjectA Pzoject B 184,325) 58,960) Initial inveatment Expected net eash flows in year 46,000 48,000 79,295 92,400 64,000 41,000 51,000 1,000 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. Required A Required B For each alternative project compute the net present value. Project A Initial Investment 84,325Explanation / Answer
a)Calculation of net present value of project A: Time Cashflow PVF @12% PV - -184325 1.00 -1,84,325.00 1.00 46000 0.8929 41,071.43 2.00 48000 0.7972 38,265.31 3.00 79295 0.7118 56,440.61 4.00 92400 0.6355 58,721.87 5.00 64000 0.5674 36,315.32 46,489.54 Net present value of Project A is $46489.54 Calculation of net present value of project B: Time Cashflow PVF @12% PV - -158960 1.00 -1,58,960.00 1.00 41000 0.8929 36,607.14 2.00 55000 0.7972 43,845.66 3.00 51000 0.7118 36,300.79 4.00 77000 0.6355 48,934.89 5.00 31000 0.5674 17,590.23 24,318.72 Net present value of Project B is $24318.72 b) Calculation of profitability index: Profitability index= (Net present value+initial investment)/initial investment Profitability index of A= (46489.54+184325)/184325=1.25 Profitability index of B= (24318.72+158960)/158960=1.15 Project A should be chosen
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