Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 12% 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.) Initial investment Pool $ (174,325) Spa $ (155,960) Net cash flows in: Year 1 54,000 28,000 Year 2 43,000 51,000 Year 3 76,295 58,000 Year 4 88,400 80,000 Year 5 65,000 19,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Req A Req B and C For each investment project compute the net present value. Pool Net Cash Flows x Present Value Year 1 Year 2 Year 3 Year 4 Year 5 Totals Spa Net Cash Flows X Present Value Year 1 Year 2 Year 3 Year 4 Year 5 Totals = = = = = = = Present Value of Net Cash Flows Present Value of Net Cash Flows
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 12% 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.) Initial investment Pool $ (174,325) Spa $ (155,960) Net cash flows in: Year 1 54,000 28,000 Year 2 43,000 51,000 Year 3 76,295 58,000 Year 4 88,400 80,000 Year 5 65,000 19,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Req A Req B and C For each investment project compute the net present value. Pool Net Cash Flows x Present Value Year 1 Year 2 Year 3 Year 4 Year 5 Totals Spa Net Cash Flows X Present Value Year 1 Year 2 Year 3 Year 4 Year 5 Totals = = = = = = = Present Value of Net Cash Flows Present Value of Net Cash Flows
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 11P
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