Following is information on two alternative investments being considered by Jole
ID: 2411254 • Letter: F
Question
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 $ (182,325) Project B $(149,960) Initial investment Expected net cash flows in year: 48,000 51,000 88,295 78,400 58,000 32,000 50,000 57,000 81,000 21,000 2 4 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.Explanation / Answer
Project A will be chosen.
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Project A Initial Investment $ 182,325 Chart Based on i= 8% Year Cashflow * PV Factor = Present Values 1 $ 48,000 * 0.92593 = $ 44,445 2 $ 51,000 * 0.85734 = $ 43,724 3 $ 88,295 * 0.79383 = $ 70,091 4 $ 78,400 * 0.73503 = $ 57,626 5 $ 58,000 * 0.68058 = $ 39,474 Present Value of Inflows $ 255,360 Initial Investment $ 182,325 Net Present Value $ 73,035