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a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?

a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Required A Required B Complete this question by entering your answers in the tabs below. Net Cash Flows 24,000 Compute net present value for each project. Based on net present value, which project is preferred? (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) S S Project 1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project 2 Year 1 Year 2 Year 3 Totals Initial investment Net present value Based on net present value, which project is preferred? S $ 23,000 15,000 26,100 Answer is complete but not entirely correct. 21,000 62,100 35,000 15,000 25,000 75,000 Present Value Factor Present Value of Net Cash Flows 0.9090 S 0.8261 x 0.7511 X < Required A S $ 0.9090 $ 0.8261 0.7511 $ S Project 2 13,635 21,559 15,771 50,965 (60,000) (9,035) 31,815 12,390 18,775 62,980 (56,500) 6,480 Required B
Transcribed Image Text:a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Required A Required B Complete this question by entering your answers in the tabs below. Net Cash Flows 24,000 Compute net present value for each project. Based on net present value, which project is preferred? (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.) S S Project 1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project 2 Year 1 Year 2 Year 3 Totals Initial investment Net present value Based on net present value, which project is preferred? S $ 23,000 15,000 26,100 Answer is complete but not entirely correct. 21,000 62,100 35,000 15,000 25,000 75,000 Present Value Factor Present Value of Net Cash Flows 0.9090 S 0.8261 x 0.7511 X < Required A S $ 0.9090 $ 0.8261 0.7511 $ S Project 2 13,635 21,559 15,771 50,965 (60,000) (9,035) 31,815 12,390 18,775 62,980 (56,500) 6,480 Required B
Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1. FV of $1. PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 2. 3. Required A Required B a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Net Cash Flows Year Project 1 $(60,000) 15,000 26,100 21,000 Complete this question by entering your answers in the tabs below. Initial investment Year 1 Year 2 Year 3 Project 2 $(56,500) 35,000 15,000 25,000 Payback period Project 1 Payback period i Compute payback period for each project. Based on payback period, which project is preferred? (Cumulative net cash outf must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.) Answer is complete but not entirely correct. Net Cash Flows Project 1 $ (60,000) 15,000 26,100 21,000 Project 2 Payback period Based on payback period, which project is preferred? 33 Cumulative Net Cash Flows S Popaned A (60,000) (45,000) (18,900) 2,100 2.11 2.30 Project 2 Net Cash Flows $ (56,500) 35,000 15,000 25,000 years years Required B > Cumulative Net Cash Flows S (56,500) (21,500) (6,500) 18,500 Project 2
Transcribed Image Text:Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1. FV of $1. PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 2. 3. Required A Required B a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Net Cash Flows Year Project 1 $(60,000) 15,000 26,100 21,000 Complete this question by entering your answers in the tabs below. Initial investment Year 1 Year 2 Year 3 Project 2 $(56,500) 35,000 15,000 25,000 Payback period Project 1 Payback period i Compute payback period for each project. Based on payback period, which project is preferred? (Cumulative net cash outf must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.) Answer is complete but not entirely correct. Net Cash Flows Project 1 $ (60,000) 15,000 26,100 21,000 Project 2 Payback period Based on payback period, which project is preferred? 33 Cumulative Net Cash Flows S Popaned A (60,000) (45,000) (18,900) 2,100 2.11 2.30 Project 2 Net Cash Flows $ (56,500) 35,000 15,000 25,000 years years Required B > Cumulative Net Cash Flows S (56,500) (21,500) (6,500) 18,500 Project 2
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