In: Accounting
Following is information on two alternative investments being
considered by Jolee Company. The company requires a 8% 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 | $ | (176,325 | ) | $ | (157,960 | ) | ||||
Expected net cash flows in year: | ||||||||||
1 | 36,000 | 28,000 | ||||||||
2 | 57,000 | 44,000 | ||||||||
3 | 91,295 | 55,000 | ||||||||
4 | 81,400 | 68,000 | ||||||||
5 | 68,000 | 30,000 | ||||||||
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