Cash payback period, net present value method, and analysis

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

Year Plant Expansion Retail Store Expansion

$1$ $$450,000$ $$500,000$

$2450,000400,000$

$3340,000350,000$

$4280,000250,000$

$5180,000200,000$

Total $$1,700,000$ $$1,700,000$

Each project requires an investment of $$900,000.$ A rate of $15\%$ has been selected for the net present value analysis.

Present Value of $$1$ at Compound Interest

Year $6\%10\%12\%15\%20\%$

$10\mathrm{.}9430\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}833$

$20\mathrm{.}8900\mathrm{.}8260\mathrm{.}7970\mathrm{.}7560\mathrm{.}694$

$30\mathrm{.}8400\mathrm{.}7510\mathrm{.}7120\mathrm{.}6580\mathrm{.}579$

$40\mathrm{.}7920\mathrm{.}6830\mathrm{.}6360\mathrm{.}5720\mathrm{.}482$

$50\mathrm{.}7470\mathrm{.}6210\mathrm{.}5670\mathrm{.}4970\mathrm{.}402$

$60\mathrm{.}7050\mathrm{.}5640\mathrm{.}5070\mathrm{.}4320\mathrm{.}335$

$70\mathrm{.}6650\mathrm{.}5130\mathrm{.}4520\mathrm{.}3760\mathrm{.}279$

$80\mathrm{.}6270\mathrm{.}4670\mathrm{.}4040\mathrm{.}3270\mathrm{.}233$

$90\mathrm{.}5920\mathrm{.}4240\mathrm{.}3610\mathrm{.}2840\mathrm{.}194$

$100\mathrm{.}5580\mathrm{.}3860\mathrm{.}3220\mathrm{.}2470\mathrm{.}162$

Required:

$1$a$.$ Compute the cash payback period for each project.

Project Cash Payback Period

Plant Expansion

$2$ years

Retail Store Expansion

$2$ years

$1$b$.$ Compute the net present value. Use the present value of $$1$ table above. If required, round to the nearest dollar.

Line Item Description Plant Expansion Retail Store Expansion

Total present value of net cash flow $fill in the blank $3$

$fill in the blank $4$

$1,210,100$

Less amount to be invested fill in the blank $5$

$900,000$

fill in the blank $6$

$900,000$

Net present value $fill in the blank $7$

$fill in the blank $8$

$310,100$

$2.$ Because of the timing of the receipt of the net cash flows, the fill in the blank $1$ of $2$

retail store expansion

offers a higher fill in the blank $2$ of $2$

net present value

$.$