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Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability index LO P3 Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 5% return from its investments. (PV of $1. EV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (102,000) 36,000 46,500 71,500 Project X2 $ (164,000) 76,500 66,500 56,500 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?

Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability index LO P3 Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 5% return from its investments. (PV of $1. EV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (102,000) 36,000 46,500 71,500 Project X2 $ (164,000) 76,500 66,500 56,500 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?

FINANCIAL ACCOUNTING
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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Exercise 24-10 (Algo) Net present value, unequal cash flows, and profitability index LO P3 Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 5% return from its investments. (PV of $1. EV of $1. PVA of $1. and EVA of 5) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (102,000) 36,000 46,500 71,500 Project X2 $ (164,000) 76,500 66,500 56,500 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?
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 considered by Tiger Company. The company requires a 5% return from its investments. (PV of $1. EV of $1. PVA of $1. and EVA of 5) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (102,000) 36,000 46,500 71,500 Project X2 $ (164,000) 76,500 66,500 56,500 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?
ces Required A Required B Required C Compute each project's net present value. (Round your final answers to the nearest dollar.) Net Cash Flows Present Value of Net Cash Flows Project X1 Year 1 Year 2 Year 3 Totals Intial investment Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value $ $ Project X1 Project X2 0 0 Numerator: Present Value of 1 at 5% Required A Required B Required C Compute each project's profitability index. $ $ $ < Required A Complete this question by entering your answers in the tabs below. Profitability Index 0 Required B > Required A Denominator: .. Required C Profitability Index Profitability index 0
Transcribed Image Text:ces Required A Required B Required C Compute each project's net present value. (Round your final answers to the nearest dollar.) Net Cash Flows Present Value of Net Cash Flows Project X1 Year 1 Year 2 Year 3 Totals Intial investment Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value $ $ Project X1 Project X2 0 0 Numerator: Present Value of 1 at 5% Required A Required B Required C Compute each project's profitability index. $ $ $ < Required A Complete this question by entering your answers in the tabs below. Profitability Index 0 Required B > Required A Denominator: .. Required C Profitability Index Profitability index 0
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