Sunland Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $ has an expected useful life of years and a salvage value of zero, and is expected to increase net annual cash flows by $ Project Bwill cost $ has an expected useful life of years and a salvage value of zero, and is expected to increase net annual cash flows by $ A discount rate of is appropriate for both projects. Click here to view PV table.
Compute the net present value and profitability index of each project. If the net present value is negative, use either a negative sign preceding the number eg or parentheses eg Round present value answers to decimal places, eg and profitability index answers to decimal places, eg For calculation purposes, use decimal places as displayed in the factor table provided.
Net present valueProject A $
Profitability indexProject
Net present value Project B
$
Profitability index Project B
Which project should be accepted based on Net Present Value?
should be accepted.
Which project should be accepted based on profitability index?
should be accepted.
