Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% 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. Project X1 $ (120,000) Initial investment Project X2 $ (200,000) Net cash flows in: Year 1 45,000 90,000 Year 2 Year 3 55,500 80,500 80,000 70,000 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? 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 Flows Present Value of 1 at 4% Present Value of Net Cash Flows Project X1 Year 1 $ 45,000 0.9620 Year 2 55,000 0.9250 Year 3 80,500 0.8890 Totals $ 180,500 $ 0
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% 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. Project X1 $ (120,000) Initial investment Project X2 $ (200,000) Net cash flows in: Year 1 45,000 90,000 Year 2 Year 3 55,500 80,500 80,000 70,000 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? 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 Flows Present Value of 1 at 4% Present Value of Net Cash Flows Project X1 Year 1 $ 45,000 0.9620 Year 2 55,000 0.9250 Year 3 80,500 0.8890 Totals $ 180,500 $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4%
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.
Project X1
$ (120,000)
Initial investment
Project X2
$ (200,000)
Net cash flows in:
Year 1
45,000
90,000
Year 2
Year 3
55,500
80,500
80,000
70,000
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?
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
Flows
Present Value
of 1 at 4%
Present Value of
Net Cash Flows
Project X1
Year 1
$
45,000
0.9620
Year 2
55,000
0.9250
Year 3
80,500
0.8890
Totals
$
180,500
$
0
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