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

Which project should be accepted based on net present value?

select a project based on its net present value Project A Project B

should be accepted.

Which project should be accepted based on profitability index?

select a project based on its profitability index Project B Project A

should be accepted.