Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 Initial investment $ (108,000) $ (176,000) Net cash flows in: Year 1 39,000 81,000 Year 2 49,500 71,000 Year 3 74,500 61,000 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?
Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 Initial investment $ (108,000) $ (176,000) Net cash flows in: Year 1 39,000 81,000 Year 2 49,500 71,000 Year 3 74,500 61,000 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8%
Project X1 | Project X2 | |
---|---|---|
Initial investment | $ (108,000) | $ (176,000) |
Net |
||
Year 1 | 39,000 | 81,000 |
Year 2 | 49,500 | 71,000 |
Year 3 | 74,500 | 61,000 |
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?

Transcribed Image Text:return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Project X1
$ (108,000)
Project X2
$ (176,000)
Initial investment
Net cash flows in:
Year 1
Year 2
Year 3
39,000
49,500
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?
Project X1
Project X2
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute each project's profitability index.
Numerator:
81,000
71,000
61,000
Profitability Index
1
1
Denominator:
=
=
Profitability Index
Profitability index
0
0

Transcribed Image Text: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. (Round your final answers to the nearest dollar.)
Net Cash Present Value
Flows
Present Value of
Net Cash Flows
of 1 at 8%
Project X1
Year 1
Year 2
Year 3
Totals
Initial investment
Net present value
Project X2
Year 1
Year 2
Year 3
Totals
Initial investment
Net present value
$
$
0
0
$
$
$
$
0
0
0
0
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