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) (Use appropriate factor(s) from the tables provided.) Year Net Cash Flows Project 1 Project 2 Initial investment $(40,000) $(80,000) 1. 10,000 35,000 2. 26,600 15,000 3. 17,000 40,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?
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) (Use appropriate factor(s) from the tables provided.) Year Net Cash Flows Project 1 Project 2 Initial investment $(40,000) $(80,000) 1. 10,000 35,000 2. 26,600 15,000 3. 17,000 40,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?
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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Gonzalez Company is considering two new projects with the following net cash flows. The company’s required rate of
| Year | Net Cash Flows | |
|---|---|---|
| Project 1 | Project 2 | |
| Initial investment | $(40,000) | $(80,000) |
| 1. | 10,000 | 35,000 |
| 2. | 26,600 | 15,000 |
| 3. | 17,000 | 40,000 |
a. Compute payback period for each project. Based on payback period, which project is preferred?
b. Compute
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