Following is information on two alternative investments being considered by Tiger Co. The company requires...
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Following is information on two alternative investments being considered by Tiger Co. The company requires a 4% 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 | Project X2 | |||||||||
| Initial investment | $ | (80,000 | ) | $ | (120,000 | ) | ||||
| Expected net cash flows in year: | ||||||||||
| 1 | 25,000 | 60,000 | ||||||||
| 2 | 35,500 | 50,000 | ||||||||
| 3 | 60,500 | 40,000 | ||||||||
a. Compute each projects net present value. b. Compute each projects profitability index. If the company can choose only one project, which should it choose?
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