Cash Payback Period, Net Present Value Method, and Analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Year Plant Expansion Retail Store Expansion 1 $152,000 $127,000 124,000 149,000 3 107,000 102,000 4 97,000 72,000 5 31,000 61,000 Total $511,000 $511,000 Each project requires an investment of $276,000. A rate of 12% has been selected for the net present value analysis.
Cash Payback Period, Net Present Value Method, and Analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Year Plant Expansion Retail Store Expansion 1 $152,000 $127,000 124,000 149,000 3 107,000 102,000 4 97,000 72,000 5 31,000 61,000 Total $511,000 $511,000 Each project requires an investment of $276,000. A rate of 12% has been selected for the net present value analysis.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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100%
Cash Payback Period,
Transcribed Image Text:Cash Payback Period, Net Present Value Method, and Analysis
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
$152,000
$127,000
2
124,000
149,000
107,000
102,000
4
97,000
72,000
5
31,000
61,000
Total
$511,000
$511,000
Each project requires an investment of $276,000. A rate of 12% has been selected for the net present value analysis.
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
0.627
0.467
0.404
0.327
0.233
9
0.592
0.424
0.361
0.284
0.194
10
0.558
0.386
0.322
0.247
0.162
Transcribed Image Text:Required:
1a. Compute the cash payback period for each project.
Cash Payback Period
Plant Expansion
Retail Store Expansion
1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.
Plant Expansion
Retail Store Expansion
Present value of net cash flow total
$
$4
Less amount to be invested
Net present value
$
2. Because of the timing of the receipt of the net cash flows, the
offers a higher
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