Cash Payback Period, Net Present Value Method, and AnalysisElite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:YearPlant ExpansionRetail Store Expansion1 $450,000 $500,000 2 450,000 400,0003 340,000 350,0004 280,000 250,0005 180,000 200,000Total$1,700,000$1,700,000Each 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 InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Required:1a. Compute the cash payback period for each project. Cash Payback PeriodPlant Expansion Retail Store Expansion 1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar. Plant ExpansionRetail Store ExpansionTotal present value of net cash flow$fill in the blank 3$fill in the blank 4Less amount to be investedfill in the blank 5fill in the blank 6Net present value$fill in the blank 7$fill in the blank 82. Because of the timing of the receipt of the net cash flows, the offers a higher .

* SOLUTION :- *(1a) Cash payback period The plant expansion = 2 years The retail store expansion…

Answered: Cash Payback Period, Net Present Value…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

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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
2	450,000	400,000
3	340,000	350,000
4	280,000	250,000
5	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
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	0.890	0.826	0.797	0.756	0.694
3	0.840	0.751	0.712	0.658	0.579
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
Retail Store Expansion

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	$fill in the blank 3	$fill in the blank 4
Less amount to be invested	fill in the blank 5	fill in the blank 6
Net present value	$fill in the blank 7	$fill in the blank 8

2. Because of the timing of the receipt of the net cash flows, the

offers a higher

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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