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 12% return from its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 $(80,000) $(120,000) Initial investment Expected net cash flows in year: 2 3 25,000 35,500 60,500 60,000 50,000 40,000 1(a) Compute each project's net present value. Net Cash Flows Present Value of 1 at 12% Present Value of Net Cash Flows Project X1 Year 1 Year 2 Year 3 Totals Amount invested Net present value Project X2 Year 1 Year 2 Year 3 Totals Amount invested Net present value $25,000 35,500 60,500 $ 121,000 (80,000) (80,000) $ 60,000 50,000 40,000 $ 150,000 (120,000) (120,000) 1(b)Compute each project's profitability index Profitability Index Choose Numerator: Choose Denominator: Profitability Index Present value of net cash flowsInitial investment Profitability index Project X1 Project X2 80,000- 120,000 0.00 0.00 2. If the company can choose only one project, which should it choose? Project X1 Project X2
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