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, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Initial investment $ (82,000) Project X2 $ (124,000) Net cash flows in: Year 1 26,000 61,500 Year 2 Year 3 36,500 51,500 61,500 41,500 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 5% 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 Initial investment $ (82,000) Project X2 $ (124,000) Net cash flows in: Year 1 26,000 61,500 Year 2 Year 3 36,500 51,500 61,500 41,500 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Project X1
Initial investment
$ (82,000)
Project x2
$ (124,000)
Net cash flows in:
Year 1
26,000
61,500
Year 2
36,500
51,500
Year 3
61,500
41,500
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 not complete.
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
Flows
Present
Value of 1
at 5%
Present Value
of Net Cash
Flows
Project X1
Year 1
$ 26,000
0.9520 S
Year 2
36,500
0.9070
24,752x
33,106
Year 3
61,500
0.8640
53,136
Totals
$ 124,000
S
110,994
Initial investment
(88,000)
Net present
S
22,994
value
Project X2
Year 1
$ 61,500
0.9520
S
58,548x
Year 2
51,500
0.9070
46,711
Year 3
41,500
0.8640
35,856x
Totals
$ 154,500
S
141,115
Initial investment
Net present
S
141,115
value
<Required A
Required B >
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