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9. Following is information on two alternative investments being considered by Tiger Co. The company requires...

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?

Net Cash Flows Present Value of 1 at 5% Present Value of Net Cash Flows
Project X1
Year 1
Year 2
Year 3
Totals
Amount invested
Net present value
Project X2
Year 1
Year 2
Year 3
Totals
Amount invested
Net present value
Profitability Index
Choose Numerator: / Choose Denominator: = Profitability Index
/ = Profitability index
Project X1
Project X2
If the company can choose only one project, which should it choose?

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