Exercise 24-14 (Algo) Net present value of an annuity LO P3 Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,100. Project 2 requires an initial investment of $93,600. Assume the company requires a 10% rate of return on its investments. (PV of $1. EV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project 1 $ 101,700 67,600 18,300 8,320 $ 7,480 Project 2 $79,400 33,280 18,720 20,800 $ 6,600 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)
Exercise 24-14 (Algo) Net present value of an annuity LO P3 Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,100. Project 2 requires an initial investment of $93,600. Assume the company requires a 10% rate of return on its investments. (PV of $1. EV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project 1 $ 101,700 67,600 18,300 8,320 $ 7,480 Project 2 $79,400 33,280 18,720 20,800 $ 6,600 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 24-14 (Algo) Net present value of an annuity LO P3
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,100.
Project 2 requires an initial investment of $93,600. Assume the company requires a 10% rate of return on its investments. (PV of $1. EV
of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.)
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Machinery
Selling, general, and administrative expenses
Income
Years 1-7
Project 1
Net present value
Years 1-51
Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present
values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest
whole dollar.)
Project 2
Net present value
Net Cash Flows x
Net Cash Flows
Present Value
of Annuity at
10%
Project 1
$ 101,700
Present Value
of Annuity at
10%
67,600
18,300
8,320
$ 7,480
Present Value of
Net Cash Flows
Project 2
$ 79,400
Present Value of
Net Cash Flows
33,2807
18,720
20,800
$ 6,600
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