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11-10

Following is information on two alternative investments being considered by Jolee Company. The company requires a 12% 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 A Project B $ (151,960) Initial investment Expected net cash flows in year: (173,325) 51,000 55,000 72,295 78,400 66,000 36,000 59,000 65,000 85,000 32,000 a. For each alternative project compute the net present value b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?Project A Initial Investment 173,325 Chart Values are Based on: Year Cash Inflowx PV Factor Present Value 4 5 Project B Initial Investment 151,960 Year Cash Inflow x PV FactorPresent Value 2 4For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Profitability Index Choose Numerator:Choose DenominatorProfitability Index Profitability index Project A Project B If the company can only select one project, which should it choose?

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