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 Initial investment 1. 2. 3. Net Cash Flows Project 1 $(48,000) 12,000 29,700 21,000 Project 2 $(72,000) 35,000 20,000 25,000 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 Initial investment 1. 2. 3. Net Cash Flows Project 1 $(48,000) 12,000 29,700 21,000 Project 2 $(72,000) 35,000 20,000 25,000 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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Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
Compute payback period for each project. Based on payback period, which project is preferred? (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
Net Cash Flows
$ (48,000)
Cumulative Net
Cash Flows
Initial investment
Year 1
Year 2
Year 3
Payback period
Project 1 Payback period
Project 2 Payback period
Based on payback period, which project is preferred?
Project 2
Net Cash
Flows
$ (72,000)
years
years
Cumulative
Net Cash
Flows
Transcribed Image Text:Exercise 24-9 (Algo) Payback period; net present value; unequal cash flows LO P1, P3
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
Initial investment
1.
2.
3.
Net Cash Flows
Project 1
$(48,000)
12,000
29,700
21,000
Project 2
$(72,000)
35,000
20,000
25,000
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?
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