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 $163,000 $136,000 2 133,000 160,000 3 115,000 110,000 4 104,000 77,000 5 33,000 65,000 Total $548,000 $548,000 Each project requires an investment of $296,000. A rate of 6% has been selected for the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 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 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 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 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 Total present value of net cash flow $ $ Less amount to be invested Net present value $ $
Cash Payback Period,
Elite Apparel Inc. is considering two investment projects. The estimated net
|
Year |
Plant Expansion |
Retail Store Expansion |
||
|
1 |
$163,000 |
|
$136,000 |
|
|
2 |
133,000 |
|
160,000 |
|
|
3 |
115,000 |
|
110,000 |
|
|
4 |
104,000 |
|
77,000 |
|
|
5 |
33,000 |
|
65,000 |
|
|
Total |
$548,000 |
|
$548,000 |
|
Each project requires an investment of $296,000. A rate of 6% has been selected for the net present value analysis.
|
Present Value of $1 at Compound Interest |
|||||
|
Year |
6% |
10% |
12% |
15% |
20% |
|
1 |
0.943 |
0.909 |
0.893 |
0.870 |
0.833 |
|
2 |
0.890 |
0.826 |
0.797 |
0.756 |
0.694 |
|
3 |
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 |
|
6 |
0.705 |
0.564 |
0.507 |
0.432 |
0.335 |
|
7 |
0.665 |
0.513 |
0.452 |
0.376 |
0.279 |
|
8 |
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 |
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 |
|
Total present value of net cash flow |
$ |
$ |
|
Less amount to be invested |
||
|
Net present value |
$ |
$ |
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