Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:

Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.
Instructions
1. Compute the following for each product:
a. Cash payback period.
b. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2).
2. Prepare a brief report advising management on the relative merits of each project.

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Plant Expansion 450,000 450,000 340,000 280,000 180,000 $1,700,000 Year Retail Store Expansion 500,000 400,000 350,000 250,000 200,000 1,700,000 Total