Jonczyk Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $537,000, has
Question:
Jonczyk Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $537,000, has an expected useful life of 15 years and a salvage value of zero, and is expected to increase net annual cash flows by $67,000. Project B will cost $283,000, has an expected useful life of 15 years and a salvage value of zero, and is expected to increase net annual cash flows by $49,000. A discount rate of 10% is appropriate for both projects. Click here to view PV table.
Calculate the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.52. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124.)
Project A | Project B | |||
---|---|---|---|---|
Net present value | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places | ||
Profitability index | enter the index rounded to 2 decimal places | enter the index rounded to 2 decimal places |
select a project based on its net present value Project A Project B | should be accepted. |
select a project based on its profitability index Project B Project A | should be accepted. |
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso