Blossom Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. A discount rate of 9% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B Profitability index - Project B tA $ $ tA Which project should be accepted based on Net Present Value? should be accepted. Which project should be accepted based on profitability index? should be accepted.

Blossom Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. A discount rate of 9% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B Profitability index - Project B tA $ $ tA Which project should be accepted based on Net Present Value? should be accepted. Which project should be accepted based on profitability index? should be accepted.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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