Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% 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 Initial investment $ (181,325 ) $ (155,960 ) Expected net cash flows in: Year 1 35,000 27,000 Year 2 54,000 43,000 Year 3 77,295 61,000 Year 4 91,400 77,000 Year 5 65,000 20,000 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? For each alternative project compute the net present value. Project A Initial Investment $181,325 Chart Values are Based on: i = % Year Cash Inflow x PV Factor = Present Value 1 = 2 = 3 = 4 = 5 = Project B Initial Investment $155,960 Year Cash Inflow x PV Factor = Present Value 1 = 2 = 3 = 4 = 5 =

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 1PB

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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. (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
Initial investment		$	(181,325	)	$	(155,960	)
Expected net cash flows in:
Year 1			35,000			27,000
Year 2			54,000			43,000
Year 3			77,295			61,000
Year 4			91,400			77,000
Year 5			65,000			20,000

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?

For each alternative project compute the net present value.

Project A
Initial Investment	$181,325
Chart Values are Based on:
i =		%
Year	Cash Inflow	x	PV Factor	=	Present Value
1				=
2				=
3				=
4				=
5				=






Project B
Initial Investment	$155,960
Year	Cash Inflow	x	PV Factor	=	Present Value
1				=
2				=
3				=
4				=
5				=

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