**Dwight Donovan, the president of Franklin Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A involves purchasing a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment.****Initial cash expenditures:**- Project A: $105,000- Project B: $49,000**Annual expected cash inflows:**- Project A: $40,560- Project B: $15,458**Both investments are expected to provide cash flow benefits for the next four years. Franklin Enterprises’ desired rate of return is 8 percent.** *(PV of $1 and PVA of $1 are applicable. Use appropriate factor(s) from the tables provided.)***Required:**a. *Compute the net present value of each project. Which project should be adopted based on the net present value approach?*b. *Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach?***Instructions:**Complete this question by entering your answers in the tabs below.- **Required A**- **Required B****Table:**Compute the net present value of each project. Which project should be adopted based on the net present value approach? *(Round your final answers to 2 decimal places.)*| | Net Present Value ||-----------------------|-------------------|| Project A | || Project B | || Which project should be adopted? | |**Navigation:**[< Required A](#) [Required B >](#)

Net present value is based on Present Value of Cash outflows and Present Value of Cash inflows.…

Dwight Donovan, the president of Franklin Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $105,000 and for Project B are $49,000. The annual expected cash inflows are $40,560 for Project A and $15,458 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Franklin Enterprises' desired rate of return is 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required

Dwight Donovan, the president of Franklin Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $105,000 and for Project B are $49,000. The annual expected cash inflows are $40,560 for Project A and $15,458 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Franklin Enterprises' desired rate of return is 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required

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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