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Problem 26-4A (Static) Applying net present value and profitability index LO P3 Rowan Company is considering two alternative investment projects. Each requires a $250,000 initial investment Project A is expected to generate net cash flows of $60,000 per year over the next six years. Project B is expected to generate net cash flows of $50,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. es Required 1 Required 2 Required 3 Compute each project's net present value. (Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar.) Project A Net Cash Flows X Present Value of Annuity at 8% Present Value of Net Cash Flows Years 1-6 Net present value Project B Net Cash Flows Present Value of Annuity at 8% Present Value of Net Cash Flows Years 1-7 Net present value Required 1 Required 2 >
Problem 26-4A (Static) Applying net present value and profitability index LO P3 Rowan Company is considering two alternative investment projects. Each requires a $250,000 initial investment. Project A is expected to generate net cash flows of $60,000 per year over the next six years. Project B is expected to generate net cash flows of $50,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 21 Required 3 Compute each project's profitability index. (Do not round intermediate values. Enter your answers rounded to the nearest whole dollar.) Profitability Index Numerator: Denominator: Profitability index Project A Project B < Required 1 Required 3 >
Problem 26-4A (Static) Applying net present value and profitability index LO P3 Rowan Company is considering two alternative investment projects. Each requires a $250,000 initial investment Project A is expected to generate net cash flows of $60,000 per year over the next six years. Project B is expected to generate net cash flows of $50,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 If the company can choose only one project, which should it choose, based on profitability index? If the company can choose only one project, which should it choose, based on profitability index? < Required 2 Required 3 Project A Project B