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Cash Payback Period, Net Present Value Method,

Cash Payback Period, Net Present Value Method,

Essentials Of Investments
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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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 $118,000 $99,000 97,000 116,000 84,000 80,000 4. 76,000 56,000 23,000 47,000 Total $398,000 $398,000 Each project requires an investment of $215,000. A rate of 20% 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 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 2. 3, 2. 4, 617
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 1 $118,000 $99,000 97,000 116,000 84,000 80,000 4. 76,000 56,000 23,000 47,000 Total $398,000 $398,000 Each project requires an investment of $215,000. A rate of 20% 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 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 2. 3, 2. 4, 617
0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 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 Required: la. 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 Total present value of net cash flow Less amount to be invested Net present value offers a higher 2. Because of the timing of the receipt of the net cash flows, the %24 %24 %24 624 67 co
Transcribed Image Text:0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 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 Required: la. 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 Total present value of net cash flow Less amount to be invested Net present value offers a higher 2. Because of the timing of the receipt of the net cash flows, the %24 %24 %24 624 67 co
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