Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability Index LO P3 Following is information on two alternative investment projects being conside return from its investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. y Tiger Company. The company requires a 4% Initial investment Project X1 $ (130,000) Project X2 $ (220,000) Net cash flows in: Year 1 Year 2 Year 3 50,000 97,500 60,500 87,500 85,500 77,500 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. Note: Round your final answers to the nearest dollar. Net Cash Flowe Present Value of 1 at 4% Present Value of Net Cash Flows Project X1 Year 1 $ 50,000 0.9615 S 48,075 Year 2 Year 3 60,500 → 85,500 0.9246 55,953 0.8890✔ 76,000 x Totals $ 196,000 S 180,028 Initial investment 130,000 Net present value 50,028 Project X2 Year 1 S 97,500 Year 2 Year 3 87,500 77,500 → 0.9615 S 0.9246 93,764 x 80,398 x 0.8890 68,948 x Totals $ 262,500 S 243,110 Initial investment 220,000 Net present S 23.110 value Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's profitability index. Profitability Index Numerator: Denominator: Present value of net cash flows Initial investment Project X1 $ 180,028 130,000 = Project X2 69 243,110/ $ 220,000 || Profitability Index Profitability index 1.38 1.11
Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability Index LO P3 Following is information on two alternative investment projects being conside return from its investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. y Tiger Company. The company requires a 4% Initial investment Project X1 $ (130,000) Project X2 $ (220,000) Net cash flows in: Year 1 Year 2 Year 3 50,000 97,500 60,500 87,500 85,500 77,500 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. Note: Round your final answers to the nearest dollar. Net Cash Flowe Present Value of 1 at 4% Present Value of Net Cash Flows Project X1 Year 1 $ 50,000 0.9615 S 48,075 Year 2 Year 3 60,500 → 85,500 0.9246 55,953 0.8890✔ 76,000 x Totals $ 196,000 S 180,028 Initial investment 130,000 Net present value 50,028 Project X2 Year 1 S 97,500 Year 2 Year 3 87,500 77,500 → 0.9615 S 0.9246 93,764 x 80,398 x 0.8890 68,948 x Totals $ 262,500 S 243,110 Initial investment 220,000 Net present S 23.110 value Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's profitability index. Profitability Index Numerator: Denominator: Present value of net cash flows Initial investment Project X1 $ 180,028 130,000 = Project X2 69 243,110/ $ 220,000 || Profitability Index Profitability index 1.38 1.11
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability Index LO P3
Following is information on two alternative investment projects being conside
return from its investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided.
y Tiger Company. The company requires a 4%
Initial investment
Project X1
$ (130,000)
Project X2
$ (220,000)
Net cash flows in:
Year 1
Year 2
Year 3
50,000
97,500
60,500
87,500
85,500
77,500
a. Compute each project's net present value.
b. Compute each project's profitability index.
c. If the company can choose only one project, which should it choose on the basis of profitability index?
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required A
Required B Required C
Compute each project's net present value.
Note: Round your final answers to the nearest dollar.
Net Cash
Flowe
Present
Value of 1
at 4%
Present Value
of Net Cash
Flows
Project X1
Year 1
$ 50,000
0.9615 S
48,075
Year 2
Year 3
60,500 →
85,500
0.9246
55,953
0.8890✔
76,000 x
Totals
$ 196,000
S
180,028
Initial investment
130,000
Net present
value
50,028
Project X2
Year 1
S 97,500
Year 2
Year 3
87,500
77,500 →
0.9615 S
0.9246
93,764 x
80,398 x
0.8890
68,948 x
Totals
$ 262,500
S
243,110
Initial investment
220,000
Net present
S
23.110
value
Required A
Required B >
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
Compute each project's profitability index.
Profitability Index
Numerator:
Denominator:
Present value of net cash flows
Initial investment
Project
X1
$
180,028
130,000
=
Project
X2
69
243,110/
$
220,000
||
Profitability
Index
Profitability
index
1.38
1.11
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