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 $167,000 Retail Store Expansion $140,000 164,000 1 N 112,000 3 4 137,000 118,000 107,000 33,000 $562,000 79,000 67,000 5 $562,000 Total Each project requires an investment of $304,000. A rate of 12% has been selected for the net present value analysis. Present Value of $1 at Compound Interest 12% 10% 15% 20% Year 6% 0.870 0.833 1 0.943 0.893 0.909 0.797 0.756 0.694 2 0.890 0.826 0.712 0.658 0.579 3 0.840 0.751 0.636 0.572 0.482 4 0.683 0.792 0.567 0.497 0.402 5 0.747 0.621 Chapter 26 Homework 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1a. Compute the cash payback period for each project. Cash Payback Period Plant Expansion 2 years Retail Store Expansion 2 years 1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar. > Plant Expansion Retail Store Expansion Total present value of net cash flow Less amount to be invested 304,000 304,000 $ Net present value offers a 2. Because of the timing of the receipt of the net cash flows, the plant expansion higher net present value