Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% 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 X1Project X2Initial investment $(106,000) $(172,000) Expected net cash flows in: Year 1 38,000 79,500 Year 2 48,500 69,500 Year 3 73,500 59,500 a. Compute each project’s net present value.b. Compute each project’s profitability index. If the company can choose only one project, which should it choose? Complete this question by entering your answers in the tabs below.Required BRequired ACompute each project's net present value. (Round your final answers to the nearest dollar.)Net CashPresent Valueof 1 at 7%Present Value ofNet Cash FlowsFlowsProject X1Year 1Year 2Year 3TotalsAmount investedNet present valueProject X2Year 1Year 2Year 3TotalsAmount investedNet present valueRequired BRequired A Complete this question by entering your answers in the tabs below.Required ARequired BCompute each project's profitability index. If the company can choose only one project, which should it choose?Profitability IndexChoose Nume rator:Choose Denominator:Profitability IndexProfitability index=Project X1Project X2If the company can choose only one project, which should it choose?Required BRequired A

Net Present Value Method: Net present value method is used to compare the initial cash outflow of…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PA

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Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% 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 X1	Project X2
Initial investment		$	(106,000	)	$	(172,000	)
Expected net cash flows in:
Year 1			38,000			79,500
Year 2			48,500			69,500
Year 3			73,500			59,500

a. Compute each project’s net present value.
b. Compute each project’s profitability index. If the company can choose only one project, which should it choose?

Complete this question by entering your answers in the tabs below.
Required B
Required A
Compute each project's net present value. (Round your final answers to the nearest dollar.)
Net Cash
Present Value
of 1 at 7%
Present Value of
Net Cash Flows
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
Required B
Required A

Complete this question by entering your answers in the tabs below.
Required A
Required B
Compute each project's profitability index. If the company can choose only one project, which should it choose?
Profitability Index
Choose Nume rator:
Choose Denominator:
Profitability Index
Profitability index
=
Project X1
Project X2
If the company can choose only one project, which should it choose?
Required B
Required A

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