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Project A Project B Initial investment .. $(160,000) $(105,000) Expected net cash flows: Year 1... Year 2 ... Year 3...... Year 4.. Year 5.. 40,000 32,000 56,000 50,000 80,295 66,000 90,400 72,000 65,000 24,000

Project A Project B Initial investment .. $(160,000) $(105,000) Expected net cash flows: Year 1... Year 2 ... Year 3...... Year 4.. Year 5.. 40,000 32,000 56,000 50,000 80,295 66,000 90,400 72,000 65,000 24,000

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 investments being considered by Jolee Company. The company requires a 10% return from its investments. For each alternative project, compute the (a) net present value and (b) profitability index. (Round your answers in part b to two decimal places.) If the company can only select one project, which should it choose?

Project A Project B Initial investment .. $(160,000) $(105,000) Expected net cash flows: Year 1... Year 2 ... Year 3...... Year 4.. Year 5.. 40,000 32,000 56,000 50,000 80,295 66,000 90,400 72,000 65,000 24,000
Transcribed Image Text:Project A Project B Initial investment .. $(160,000) $(105,000) Expected net cash flows: Year 1... Year 2 ... Year 3...... Year 4.. Year 5.. 40,000 32,000 56,000 50,000 80,295 66,000 90,400 72,000 65,000 24,000
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