Gonzalez Co. is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%. 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? ### Transcription of Net Cash Flows Table**Overview:**This table presents the net cash flows for two distinct investment projects over a period of three years, including the initial investment required for each one.**Table Details:**- **Columns:** - **Year**: Denotes the timeline of cash flow. - **Project 1**: Lists the cash flows for Project 1. - **Project 2**: Lists the cash flows for Project 2.- **Rows:** - **Initial Investment**: - Project 1: $(60,000) - Project 2: $(60,000) - **Year 1 Cash Flow**: - Project 1: $30,000 - Project 2: $35,000 - **Year 2 Cash Flow**: - Project 1: $30,000 - Project 2: $20,000 - **Year 3 Cash Flow**: - Project 1: $5,000 - Project 2: $20,000**Analysis:**The table provides a comparison of cash flows resulting from two investment projects. Both projects require an equal initial investment of $60,000. Cash inflows for each project vary across the three years, providing valuable data for evaluating the financial viability and potential returns of the investments.

Payback period is the period required to recover the initial investment amount invested in the…

Answered: period for each project. Based on…

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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Gonzalez Co. is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%.

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?

### Transcription of Net Cash Flows Table

**Overview:**

This table presents the net cash flows for two distinct investment projects over a period of three years, including the initial investment required for each one.

**Table Details:**

- **Columns:**
- **Year**: Denotes the timeline of cash flow.
- **Project 1**: Lists the cash flows for Project 1.
- **Project 2**: Lists the cash flows for Project 2.

- **Rows:**
- **Initial Investment**:
- Project 1: $(60,000)
- Project 2: $(60,000)

- **Year 1 Cash Flow**:
- Project 1: $30,000
- Project 2: $35,000

- **Year 2 Cash Flow**:
- Project 1: $30,000
- Project 2: $20,000

- **Year 3 Cash Flow**:
- Project 1: $5,000
- Project 2: $20,000

**Analysis:**

The table provides a comparison of cash flows resulting from two investment projects. Both projects require an equal initial investment of $60,000. Cash inflows for each project vary across the three years, providing valuable data for evaluating the financial viability and potential returns of the investments.

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