Following is information on two alternative investments being considered by Jolee Company. The company requires...
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Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (FV of $1. PV of $1. EVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Project B $ (105,000) Project A 5(160,000) Initial investment Expected net cash flows in year: 40,000 56,000 80,295 32,000 50,000 66,000 72,000 24,000 90,400 65,000 1(a) For each alternative project compute the net present value. Project A Initial Investment 160,000 Chart Values are Based on: 10% Cash Inflow Year PV Factor Present Value 40,000 x 0.9090= 36,363 56,000 x 80,295 x 0.8264= 43.280 0.7513= 60,326 90,400 x 0.6830= 61.743 65,000 x 40,365 0.6210= 242,077 242,077 160,000 Project B Initial Investment $4 105,000 Year Cash Inflow PV Factor Present Value 1. %23 4. 5. 12345 1(b)For each altemative project compute the profitability index Profitability Index Choose Denominator: Choose Numerator: Profitability Index Profitability index Project A Project B 2. Assume if the company can only select one project which should it choose? Project B Project A
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