Gonzalez Company is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net Cash Flows Project 1 Project 2 Initial investment $(46,000) $(74,000) 1. 11,500 35,000 2. 25,900 20,000 3. 21,500 25,000 Compute payback period for each project. Based on payback period, which project is preferred? Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Compute payback period for each project. Based on payback period, which project is preferred? Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places. Year Project 1 Project 2 Net Cash Flows Cumulative Net Cash Flows Net Cash Flows Cumulative Net Cash Flows Initial investment $(46,000) $(74,000) Year 1 Year 2 Year 3 Payback period Project 1 Payback period years Project 2 Payback period years Based on payback period, which project is preferred? Compute net present value for each project. Based on net present value, which project is preferred? Note: Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar. Net Cash Flows Present Value Factor Present Value of Net Cash Flows Project 1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project 2 Year 1 Year 2 Year 3 Totals Initial investment Net present value Based on net present value, which project is preferred?

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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26-9

Gonzalez Company is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1)

Note: Use appropriate factor(s) from the tables provided.

Year	Net Cash Flows
Project 1	Project 2
Initial investment	$(46,000)	$(74,000)
1.	11,500	35,000
2.	25,900	20,000
3.	21,500	25,000

Compute payback period for each project. Based on payback period, which project is preferred?
Compute net present value for each project. Based on net present value, which project is preferred?

Complete this question by entering your answers in the tabs below.

Compute payback period for each project. Based on payback period, which project is preferred?
Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.

Year	Project 1	Project 2
Net Cash Flows	Cumulative Net Cash Flows	Net Cash Flows	Cumulative Net Cash Flows
Initial investment	$(46,000)		$(74,000)
Year 1
Year 2
Year 3
Payback period
Project 1 Payback period		years
Project 2 Payback period		years
Based on payback period, which project is preferred?

Compute net present value for each project. Based on net present value, which project is preferred?
Note: Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.

	Net Cash Flows	Present Value Factor	Present Value of Net Cash Flows
Project 1
Year 1
Year 2
Year 3
Totals
Initial investment
Net present value
Project 2
Year 1
Year 2
Year 3
Totals
Initial investment
Net present value
Based on net present value, which project is preferred?

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