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Following is information on two alternative Investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (126,000) 48,000 58,500 83,500 Project X2 $ (212,000) 94,500 84,500 74,500 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?

Following is information on two alternative Investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (126,000) 48,000 58,500 83,500 Project X2 $ (212,000) 94,500 84,500 74,500 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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Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Project X1 Year 1 Year 2 Year 3 Totals Initial investment Year 1 Year 2 Year 3 Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value 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. $ 44,860 50,299 7,755 $ 102,914 Project X1 $ (126,000) Net Cash Present Value Flows of 1 at 7% $ 48,000 58,500 83,500 77,945 63,412 0 $ 141,357 Project X2 $ (212,000) $ Present Value of Net Cash Flows $ 94,500 84,500 74,500 $ $ 0 0 0 0
Transcribed Image Text:Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Project X1 Year 1 Year 2 Year 3 Totals Initial investment Year 1 Year 2 Year 3 Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value 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. $ 44,860 50,299 7,755 $ 102,914 Project X1 $ (126,000) Net Cash Present Value Flows of 1 at 7% $ 48,000 58,500 83,500 77,945 63,412 0 $ 141,357 Project X2 $ (212,000) $ Present Value of Net Cash Flows $ 94,500 84,500 74,500 $ $ 0 0 0 0
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (126,000) Required A Required B Required C Project X1 Project X2 48,000 58,500 83,500 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? Complete this question by entering your answers in the tabs below. Compute each project's profitability index. Project X2 $ (212,000) Numerator: Present value of net cash flows 94,500 84,500 74,500 Profitability Index Denominator: 1 Initial investment < Required A = = Profitability Index Profitability index Required C > 0 0
Transcribed Image Text:Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% 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. Initial investment Net cash flows in: Year 1 Year 2 Year 3 Project X1 $ (126,000) Required A Required B Required C Project X1 Project X2 48,000 58,500 83,500 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? Complete this question by entering your answers in the tabs below. Compute each project's profitability index. Project X2 $ (212,000) Numerator: Present value of net cash flows 94,500 84,500 74,500 Profitability Index Denominator: 1 Initial investment < Required A = = Profitability Index Profitability index Required C > 0 0
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