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Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% 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 $ (108,000) $ (176,000) Net cash flows in:     Year 1 39,000 81,000 Year 2 49,500 71,000 Year 3 74,500 61,000    a. Compute each project’s net present value. b. Compute each project’s profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index?

Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% 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 $ (108,000) $ (176,000) Net cash flows in:     Year 1 39,000 81,000 Year 2 49,500 71,000 Year 3 74,500 61,000    a. Compute each project’s net present value. b. Compute each project’s profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% 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 $ (108,000) $ (176,000)
Net cash flows in:    
Year 1 39,000 81,000
Year 2 49,500 71,000
Year 3 74,500 61,000

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

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 $ (108,000) Project X2 $ (176,000) Initial investment Net cash flows in: Year 1 Year 2 Year 3 39,000 49,500 74,500 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Project X1 Project X2 Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's profitability index. Numerator: 81,000 71,000 61,000 Profitability Index 1 1 Denominator: = = Profitability Index Profitability index 0 0
Transcribed Image Text: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 $ (108,000) Project X2 $ (176,000) Initial investment Net cash flows in: Year 1 Year 2 Year 3 39,000 49,500 74,500 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Project X1 Project X2 Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's profitability index. Numerator: 81,000 71,000 61,000 Profitability Index 1 1 Denominator: = = Profitability Index Profitability index 0 0
a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. (Round your final answers to the nearest dollar.) Net Cash Present Value Flows Present Value of Net Cash Flows of 1 at 8% Project X1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value $ $ 0 0 $ $ $ $ 0 0 0 0
Transcribed Image Text:a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. (Round your final answers to the nearest dollar.) Net Cash Present Value Flows Present Value of Net Cash Flows of 1 at 8% Project X1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project X2 Year 1 Year 2 Year 3 Totals Initial investment Net present value $ $ 0 0 $ $ $ $ 0 0 0 0
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