Following is information on two alternative investments being considered by Jolee Company. The company requires a 12% return from its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1). (Use appropriate factor(s) from the tables provided.) Project A Project B
Initial investment $ (179,325) $ (150,960)
Expected net cash flows in year:
1 41,000 41,000
2 40,000 50,000
3 74,295 64,000
4 88,400 84,000
5 57,000 26,000
1(a) For each alternative project compute the net present value.
Project A
Initial Investment $179,325
Chart Values are Based on:
i = %
Year Cash Inflow x PV factor = Present Value
1 =
2 =
3 =
4 =
5 =
Project B
Initial Investment $150,960
Year Cash Inflow x PV factor = Present Value
1 =
2 =
3 =
4 =
5 =
1(b) For each alternative project compute the profitability index.
Profitability Index
Choose Numerator: / Choose Denominator: = 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