Wildhorse Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $435,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $253,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $45,200. A discount rate of 10% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A $enter the number rounded to 2 decimal places Profitability index - Project A enter the profitability index rounded to 2 decimal places Net present value - Project B $enter a dollar amount rounded to 0 decimal places Profitability index - Project B enter the number rounded to 2 decimal places Which project should be accepted based on Net Present Value? select a project should be accepted. Which project should be accepted based on profitability index?
Wildhorse Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $435,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual
Compute the
Net present value - Project A
|
$enter the number rounded to 2 decimal places | ||
---|---|---|---|
Profitability index - Project A
|
enter the profitability index rounded to 2 decimal places | ||
Net present value - Project B
|
$enter a dollar amount rounded to 0 decimal places | ||
Profitability index - Project B
|
enter the number rounded to 2 decimal places |
Which project should be accepted based on Net Present Value?
select a project should be accepted. |
Which project should be accepted based on profitability index?
select a project should be accepted. |
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