Unique Boutique Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Plant Retail Store Year Expansion Expansion 1 $ 280,000 $ 260,000 2 260,000 260,000 3 230,000 250,000 4 260,000 250,000 5 270,000 280,000 Total $1,300,000 $1,300,000 Each project requires an investment of $770,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each project: a. Cash payback period. b. The net present value. Use the present value of $1 table appearing in this chapter. 2. Prepare a brief report advising management on the relative merits of each project.
Unique Boutique Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Plant Retail Store Year Expansion Expansion 1 $ 280,000 $ 260,000 2 260,000 260,000 3 230,000 250,000 4 260,000 250,000 5 270,000 280,000 Total $1,300,000 $1,300,000 Each project requires an investment of $770,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each project: a. Cash payback period. b. The net present value. Use the present value of $1 table appearing in this chapter. 2. Prepare a brief report advising management on the relative merits of each project.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Unique Boutique Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
|
|
Plant |
Retail Store |
|
Year |
Expansion |
Expansion |
|
1 |
$ 280,000 |
$ 260,000 |
|
2 |
260,000 |
260,000 |
|
3 |
230,000 |
250,000 |
|
4 |
260,000 |
250,000 |
|
5 |
270,000 |
280,000 |
|
Total |
$1,300,000 |
$1,300,000 |
Each project requires an investment of $770,000. A rate of 15% has been selected for the net present value analysis.
Instructions
1. Compute the following for each project:
a. Cash payback period.
b. The net present value. Use the present value of $1 table appearing in this chapter.
2. Prepare a brief report advising management on the relative merits of each project.
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