Required:1a. Compute the cash payback period for each project.Cash Payback PeriodPlant Expansion2 years vRetail Store Expansion2 years v1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearestdollar.Plant ExpansionRetail Store ExpansionTotal present value of net cash flow375,868 X368,674 x311,000 v311,000 vLess amount to be investedNet present value64,868 x57,674 x2. Because of the timing of the receipt of the net cash flows, the plant expansion v offers a highernet present value vFeedbackV Check My Workla. For each project, start with year 1 and accumulate the net cash flows until the amount to be invested isreached.1b. For each project, multiply the present value factor for each year (Refer to Exhibit 2 in the text) by thatyear's net cash flow. Subtract the amount to be invested from the total present value of the net cash flow.Which project offers the more favorable net present value?2. Consider when cash flows are received and the time value of money. 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 asfollows:YearPlant ExpansionRetail Store Expansion1$171,000$143,0002140,000168,0003121,000115,0004109,00081,000534,00068,000Total$575,000$575,000Each project requires an investment of $311,000. A rate of 12% has been selected for the net present value analysis.Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.8330.8900.8260.7970.7560.6940.8400.7510.7120.6580.5790.7920.6830.6360.5720.4820.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.2798.0.6270.4670.4040.3270.2330.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Required:la. Compute the cash payback period for each project.2.3.

Solution 1b: Period PV Factor Plant expansion Retail Store expansion Amount…

Elite Apparel Inc. is considering two investment projects. The estimated net cas follows: Year Plant Expansion Retail Store Expansion $171,000 $143,000 2 140,000 168,000 121,000 115,000 4 109,000 81,000 5 34,000 68,000 Total $575,000 $575,000 Each project requires an investment of $311,000. A rate of 12% has been sele 1,

Elite Apparel Inc. is considering two investment projects. The estimated net cas follows: Year Plant Expansion Retail Store Expansion $171,000 $143,000 2 140,000 168,000 121,000 115,000 4 109,000 81,000 5 34,000 68,000 Total $575,000 $575,000 Each project requires an investment of $311,000. A rate of 12% has been sele 1,

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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