A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided below:
The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation.
Required:
(a) Calculate the net present value for each investment.
(b) Calculate the profitability index for each investment.
(c) Which investment should this company select? Explain.

Question

A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided below: 
The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation.
Required:
(a) Calculate the net present value for each investment.
(b) Calculate the profitability index for each investment.
(c) Which investment should this company select? Explain.

Quizplus · Accepted Answer

The Answer of A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided below: 
The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation.
Required:
(a) Calculate the net present value for each investment.
(b) Calculate the profitability index for each investment.
(c) Which investment should this company select? Explain.

A Company Has a Decision to Make Between Two Investment