Following is information on two alternative investments being considered by Tiger Co. The company requires a 4% return from its investments.

             ____________________________________Project X1 __________Project X2

Initial investment . . . . . . . . . . . . . . . . . . . . . . ($80,000) ................. ($120,000)

Expected net cash flows in year:

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 ..................... 60,000

2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,500 ..................... 50,000

3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,500 ..................... 40,000

Compute each project's

(a) Net present value and

(b) Profitability index. (Round present value calculations to the nearest dollar and round the profitability index to two decimal places.) If the company can choose only one project, which should it choose? Explain.