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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000.   1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer?

Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000.   1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000.
 
1. Compute the profitability index for each project.
2. Based on the profitability index, which project should the company prefer?
 

Required 1 Required 2 Compute the profitability index for each project. Profitability Index Choose Numerator: Choose Denominator: Profitability Index Profitability index Project 1 Project 2 < Required 1 Required 2 > Required 1 Required 2 Based on the profitability index, which project should the company prefer? Based on the profitability index, which project should the company prefer? < Required 1 Required 2 >
Transcribed Image Text:Required 1 Required 2 Compute the profitability index for each project. Profitability Index Choose Numerator: Choose Denominator: Profitability Index Profitability index Project 1 Project 2 < Required 1 Required 2 > Required 1 Required 2 Based on the profitability index, which project should the company prefer? Based on the profitability index, which project should the company prefer? < Required 1 Required 2 >
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