1 2 2. Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: 3 4 5 Total Year Plant Expansion $440,000 440,000 350,000 270,000 180,000 $1,680,000 Retail Store Expansion $490,000 390,000 360,000 240,000 200,000 $1,680,000 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Problem 2 Instructions a. Compute the following for each product: i. Cash payback period. ii. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). b. Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)

1 2 2. Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: 3 4 5 Total Year Plant Expansion $440,000 440,000 350,000 270,000 180,000 $1,680,000 Retail Store Expansion $490,000 390,000 360,000 240,000 200,000 $1,680,000 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Problem 2 Instructions a. Compute the following for each product: i. Cash payback period. ii. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). b. Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)

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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Question

12
2. Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from
each project are as follows:
3
4
5
Total
Year
Plant Expansion
Problem 2 Instructions
a. Compute the following for each product:
i.
ii.
$440,000
440,000
350,000
270,000
180,000
$1,680,000
Retail Store Expansion
Each project has an initial investment of $900,000. A rate of 15 % has been selected for net present
value analysis.
$490,000
390,000
360,000
240,000
200,000
$1,680,000
Cash payback period.
The net present value. Use the present value of $1 table appearing in this chapter
(Exhibit 2).
b. Prepare a brief report advising management on the relative merits of each project. (Minimum.
two full paragraphs.)

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