Following is information on two alternative investments being considered by Jole
ID: 2797276 • Letter: F
Question
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
For each alternative project compute the net present value.
For each alternative project compute the profitability index.
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (FV of $1, PV of S1, FVA of S1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B (180,000) (105.000) Initial investment Expected net cash flows in year 40,000 56.000 0.295 90.400 65,000 32.000 50.000 66.000 72.000 24,000 1(a) For each alternative project compute the net present value. Answer is complete but not entirely correct. Project A 160.000 t Values are Based on: Year 40.000 01x | 0.9090 0 56000082603 025 0.7510 90.400 0.8830 65.000 x 36.380 46.25 60,302 61.743 40.365 245,026 0.6210 Present value of cash inflows Present value of cash outfiows Net present value 245.02 160,000 85,028 Project B Initial Investment 105,000 Year 32000 0.00 50.000 x 6.000 0.7510 72.000 x 10.6830 |= 24,000x 29,088 41.300 40.588 49,176 14.904 184.034 0.8260- 0.6210 Present value of cash inflows Present value of cash outfiows Net present value 184.034 105.000 79,034 1(b)For each alternative project compute the profitability index. Answer is not complete Profitability Index Choose Profitability Choose Numerator Profitability Project 2. Assume if the company can only select one project, which should it choose? O Project A O Project EBExplanation / Answer
Statement showing NPV
Statement showing PI
As per NPV project A should be selected but as per PI project B is preferable
Project A Project B Year Cash flow PVIF @10% PV Cash flow PVIF @10% PV 1 40000 0.909 36363.63636 32000 0.909 29091 2 56000 0.826 46280.99174 50000 0.826 41322 3 80295 0.751 60326.82194 66000 0.751 49587 4 90400 0.683 61744.41637 72000 0.683 49177 5 65000 0.621 40359.886 24000 0.621 14902 Total 245075.7524 184079 Less: initial investment 160000 105000 NPV 85075.75 79079.08