Montana Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $210,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $62,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:
$\begin{array}{crr}
\text { Year}&\text { Cash inflows trom Project } Y\
1 & \$ 44,000 \
2 & 48,000 \
3 & 60,000 \
4 & 76,000 \
5 & 80,000 \
\text { Total }& \$ 308,000
\end{array}$ Montana's cost of capital is 12%. (PV of $1and PVA of $1) (Use appropriate factor(s) from the tables provided.)Required:Calculate the present value index for Project X and for Project Y. Round your answer to three decimal places.Indicate whether each of the projects is an acceptable investment.Based on present value index, which of the two projects should Montana implement?

Question

Montana Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $210,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $62,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:
 $\begin{array}{crr}
\text { Year}&\text {  Cash inflows trom Project } Y\
1 & \$ 44,000 \
2 & 48,000 \
3 & 60,000 \
4 & 76,000 \
5 & 80,000 \
\text { Total }& \$ 308,000
\end{array}$ Montana's cost of capital is 12%. (PV of $1and PVA of $1) (Use appropriate factor(s) from the tables provided.)Required:Calculate the present value index for Project X and for Project Y. Round your answer to three decimal places.Indicate whether each of the projects is an acceptable investment.Based on present value index, which of the two projects should Montana implement?

Quizplus · Accepted Answer

The Answer of Montana Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $210,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $62,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:
 $\begin{array}{crr}
\text { Year}&\text {  Cash inflows trom Project } Y\
1 & \$ 44,000 \
2 & 48,000 \
3 & 60,000 \
4 & 76,000 \
5 & 80,000 \
\text { Total }& \$ 308,000
\end{array}$ Montana's cost of capital is 12%. (PV of $1and PVA of $1) (Use appropriate factor(s) from the tables provided.)Required:Calculate the present value index for Project X and for Project Y. Round your answer to three decimal places.Indicate whether each of the projects is an acceptable investment.Based on present value index, which of the two projects should Montana implement?

Montana Company Is Evaluating Two Different Capital Investments, Project X