In: Accounting
9.
Following is information on two alternative investments being
considered by Tiger Co. The company requires a 5% 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.)
Project X1 | Project X2 | |||||||||
Initial investment | $ | (82,000 | ) | $ | (124,000 | ) | ||||
Expected net cash flows in: | ||||||||||
Year 1 | 26,000 | 61,500 | ||||||||
Year 2 | 36,500 | 51,500 | ||||||||
Year 3 | 61,500 | 41,500 | ||||||||
a. Compute each project’s net present value.
b. Compute each project’s profitability index. If
the company can choose only one project, which should it
choose?
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