Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 6% 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.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Pool Spa $ (185,325) $ (146,960) 40,000 43,000 83,295 93,400 72,000 42,000 48,000 64,000 84,000 30,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select one project, which should it choose on the basis of profitability index?
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 6% 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.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Pool Spa $ (185,325) $ (146,960) 40,000 43,000 83,295 93,400 72,000 42,000 48,000 64,000 84,000 30,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select 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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Transcribed Image Text:Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company
requires a 6% 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.)
Initial investment
Net cash flows in:
Year 1
Year 2
Year 3
Year 4
Year 5
Req A
Pool
Spa
$ (185,325) $ (146,960)
a. For each investment project compute the net present value.
b. For each investment project compute the profitability index.
c. If the company can only select one project, which should it choose on the basis of profitability index?
Pool
40,000
43,000
83,295
93,400
72,000
Complete this question by entering your answers in the tabs below.
Req B and C
42,000
48,000
64,000
84,000
30,000
For each investment project compute the net present value.
Net Cash Flows x Present Value =
Present Value of
N-LA
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