Following is information on two alternative investments being considered by Jolee Company. The company requires a 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 A Project B Initial investment $ (180,325 ) $ (140,960 ) Expected net cash flows in: Year 1 49,000 33,000 Year 2 57,000 52,000 Year 3 78,295 67,000 Year 4 87,400 69,000 Year 5 70,000 35,000 a. For each alternative project compute the net present value. b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?
Following is information on two alternative investments being considered by Jolee Company. The company requires a 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 A Project B Initial investment $ (180,325 ) $ (140,960 ) Expected net cash flows in: Year 1 49,000 33,000 Year 2 57,000 52,000 Year 3 78,295 67,000 Year 4 87,400 69,000 Year 5 70,000 35,000 a. For each alternative project compute the net present value. b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?
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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Following is information on two alternative investments being considered by Jolee Company. The company requires a 8%
| Project A | Project B | |||||||||
| Initial investment | $ | (180,325 | ) | $ | (140,960 | ) | ||||
| Expected net cash flows in: | ||||||||||
| Year 1 | 49,000 | 33,000 | ||||||||
| Year 2 | 57,000 | 52,000 | ||||||||
| Year 3 | 78,295 | 67,000 | ||||||||
| Year 4 | 87,400 | 69,000 | ||||||||
| Year 5 | 70,000 | 35,000 | ||||||||
a. For each alternative project compute the net present value.
b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?
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