Following is information on two alternative investments bein

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 $ (96,000) Project X2 $(152,000) Initial investment Expected net cash flows in year: 33,000 43,500 68,500 72,000 62,000 52,000 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 A Required B Compute each project\'s net present value. (Round your final answers to the nearest dollar.) Net Cash Flows Present Value of 1 at 7% Present Value of Net Cash 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

Solution

for project X1 discounting factor 7%

for project X2 discounting factor 7%

profitability index

if company can choose only one project, select project X1 where project X1 has more PI than project X2

Year	cash inflow	discount factor	Present value
0	intial investment A		(96,000)
1	33,000	0.9345	30,841
2	43,500	0.8734	37,993
3	68,500	0.8163	55,916
	total of cash inflows B		124,750
	Net present value B-A		28,750