PR26-2A Cash payback period, net present value method, and analysis 1. b. Plant expansion, Elite Apparel Inc. is considering two investment projects. The estimated net cash flows $305,040 OBJ. 2,3 from each project are as follows: Plant Expansion Retail Store Expansion 450,000 450,000 340,000 280,000 180,000 $1,700,000 500,000 400,000 350,000 250,000 200,000 Excel Total Each project requires an investment of S9OO,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. Initial investment Plant Expansion Net CashCumulative Net Retail Store Expansion Net CashCumulative Net Flow Cash Flows Flow Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 The Plant Expansion project achieves payback in The Retail Store Expansion project achieves payback in expansion project is recommended, based on the cash payback period 32 33 b. Net Present Value Analysis Present Value of Net Cash Flow 35 36 37 38 Net Cash Flow Present Value of SI at 15% Plant Expansion Retail Store Expansion Plant Expansion Retail Store Expansiorn 39 Year 1 Year 2 Year 3 Year 4 Year 5 Total 40 41 42 43 45 46 Amount to be invested Net present value expansion project is recommended, based on its higher net present value 48 49 50 51 2. 52 Key essay answer here 53 56 57 58 Pr. 26-2A