Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, hewill be able to invest in only one of them. Project A is to purchase a măchine that will enáble factory automation: the machine iş expectedto have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employeesoperating the current equipment Intial cash expenditures for Projec A are $400 000 and for Project B are S160.000. Theannual expected cash inflows are S126,000 for Projęct A and $52,800 for Project B. Both investments are expected to providePape 472RequiredCompute the net present value of cach project. Which project should be adopted based on the net present value approach? Round yourcomputations to two decimal points..Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of returnCompare the net present value approach with the internal rate of return approach. Which method is better in the given circumstances?Why?

Answered: Image /qna-images/answer/37a83652-2d56-4f99-b3f5-ae899f77dc2f.jpg

Answered: Dwight Donovan, the president of…

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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