Following is information on two alternative investments being considered by Jolee Company. The company requires a...

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Accounting

Following is information on two alternative investments beingconsidered by Jolee Company. The company requires a 6% return fromits 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 $ (183,325 ) $ (155,960 )
Expected net cash flows in year:
1 51,000 36,000
2 48,000 57,000
3 76,295 63,000
4 78,400 81,000
5 60,000 28,000

a. For each alternative project compute the netpresent value.
b. For each alternative project compute theprofitability index, if the company can only select one project,which should it choose?
a)
Project A
Initial Investment $183,325
Chart Values are Based on:
i =
Year Cash Inflow x PV Factor = Present Value
1 =
2 =
3 =
4 =
5 =
Project B
Initial Investment $155,960
Year Cash Inflow x PV Factor = Present Value
1 =
2 =
3 =
4 =
5 =
b
Profitability Index
Choose Numerator: / Choose Denominator: = Profitability Index
/ = Profitability index
Project A 0
Project B 0
If the company can onlyselect one project, which should it choose?

Answer & Explanation Solved by verified expert

3.6 Ratings (385 Votes)

Ans PROJECT A Initial Investment 183325 Chart values are based on i 6 Year Cash inflow P V Factor Present Value 1 51000 0943 48093 2 48000 0890 42720 3 76295 0840 64088 4 78400 0792 62093 5 60000 0747 44820 Total Present Value Of See Answer

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	Project A				Project B
Initial investment		$	(183,325	)		$	(155,960	)
Expected net cash flows in year:
1			51,000				36,000
2			48,000				57,000
3			76,295				63,000
4			78,400				81,000
5			60,000				28,000