In: Accounting
Following is information on two alternative investments being
considered by Jolee Company. The company requires a 10% 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 A | Project B | |||||||||
Initial investment | $ | (175,325 | ) | $ | (142,960 | ) | ||||
Expected net cash flows in: | ||||||||||
Year 1 | 40,000 | 33,000 | ||||||||
Year 2 | 44,000 | 43,000 | ||||||||
Year 3 | 91,295 | 57,000 | ||||||||
Year 4 | 88,400 | 78,000 | ||||||||
Year 5 | 64,000 | 36,000 | ||||||||
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?