Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...
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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 $500,000 450,000 400,000 340,000 350,000 280,000 250,000 180,000 200,000 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 10% 2 3 4 5 Year 6% 12% 15% 20% Year 1 234 5 6 7 8 9 10 Present Value of $1 at Compound Interest 10% 0.909 0.826 0.751 0.683 0.621 0.564 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.467 0.592 0.424 0.558 0.513 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 Required: 1a. Compute the cash payback period for each project. Cash Payback Period Plant Expansion Retail Store Expansion 1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar. 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 $500,000 450,000 400,000 340,000 350,000 280,000 250,000 180,000 200,000 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 10% 2 3 4 5 Year 6% 12% 15% 20% Year 1 234 5 6 7 8 9 10 Present Value of $1 at Compound Interest 10% 0.909 0.826 0.751 0.683 0.621 0.564 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.467 0.592 0.424 0.558 0.513 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 Required: 1a. Compute the cash payback period for each project. Cash Payback Period Plant Expansion Retail Store Expansion 1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.
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1 a Calculate the cash payback for each project as follows Plant Expansion Year Net Cash Flows Cumulative Net Cash Flows 0 900000 900000 1 450000 450000 2 450000 0 3 340000 340000 4 280000 620000 5 180000 800000 Payback period 1450000450000 11 2 years Retail Store Expansion Year Net Cash Flows Cumulative Net Cash Flows 0 900000 900000 1 500000 400000 2 400000 0 3 350000 350000 4 250000 500000 5 200000 700000 Payback period 1400000400000 11 2 years b Calculate the Net Present Value at the rate of 15 for both projects as follows Plant Expansion Year Net Cash Flow ... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
Posted Date:
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