Jester Company is considering two alternative projects Project 1 requires an initial investment of $500,000 and has a net present value of cash flows of $1,200,000 Project 2 requires an initial investment of $3,500,000 and has a net present value of cash flows of $1,900,000 Compute the profitabilit...

Project A Profitability index 1200000 500000 24 ...

Jester Company is considering two alternative projects. Project 1 requires an initial investment of $500,000 and has

Question:

Jester Company is considering two alternative projects. Project 1 requires an initial investment of $500,000 and has a of cash flows of $1,200,000. Project 2 requires an initial investment of $3,500,000 and has a of cash flows of $1,900,000. Compute the profitability index for each project. Based on the profitability index, which project should the company prefer? Explain.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...