Compute each project profitability index

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Problem - Following is information on two alternative investments being considered by Tiger Co. The company requires a 10% return from its investments.

 

Project X1

Project X2

Initial investment

$(82,000)

$(121,000)

Expected net cash flows in:

 

 

Year 1

26,000

61,500

Year 2

36,500

51,500

Year 3

61,500

41,500

Required -

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?

Reference no: EM133042209

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