Cash Payback Period, Net Present Value Method, and AnalysisElite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:YearPlant ExpansionRetail Store Expansion$134,000110,00095,00086,00026,000$451,0001234СлTotalEach project requires an investment of $244,000. A rate of 10% has been selected for the net present value analysis.Present Value of $1 at Compound Interest6%10%0.9090.826Year12345678910Required:0.9430.8900.8400.7920.7470.7050.6650.6270.5920.5580.7510.6830.6210.5640.5130.4670.4240.38612%0.8930.7970.7120.6360.5670.5070.4520.404$112,000132,00090,00063,00054,000$451,0000.3610.32215%0.8700.7560.6580.5720.4970.4320.3760.3270.2840.24720%0.8330.6940.5790.4820.4020.3350.2790.2330.1940.162 1a. Compute the cash payback period for each project.Cash Payback PeriodPlant Expansion2 yearsRetail Store Expansion2 years1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.Retail Store ExpansionPlant Expansion324,364 X244,000 ✓$80,364 X$Total present value of net cash flowLess amount to be investedNet present value2. Because of the timing of the receipt of the net cash flows, the plant expansion319,326 X244,000 ✓75,326 Xoffers a higher net present value

This is related to capital budgeting. The capital budgeting tools that we have to use are cash…

Compute the cash payback period each project Cash Payback Period 2 years 2 years 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 $ 324,364 X 244,000 ✓ 80,364 X Total present value of net cash flow Less amount to be invested Net present value 2. Because of the timing of the receipt of the net cash flows, the plant expansion 319,326 X 244,000 ✓ 75,326 X offers a higher net present value

Compute the cash payback period each project Cash Payback Period 2 years 2 years 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 $ 324,364 X 244,000 ✓ 80,364 X Total present value of net cash flow Less amount to be invested Net present value 2. Because of the timing of the receipt of the net cash flows, the plant expansion 319,326 X 244,000 ✓ 75,326 X offers a higher net present value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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