Exercise 26-10 (Static) Net present value, unequal cash flows, and profitability index LO P3

Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% 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	Project X2
Initial investment	$ (80,000)	$ (120,000)
Net cash flows in:
Year 1	25,000	60,000
Year 2	35,500	50,000
Year 3	60,500	40,000

a. Compute each projects net present value. b. Compute each projects profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index?