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Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limite resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a raining program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required . Compute the net present value of each project. Which project should be adopted based on the net present value approach? . Compute the approximate internal rate of return of each project. Which one should be adopted based on the interna rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value

Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limite resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a raining program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required . Compute the net present value of each project. Which project should be adopted based on the net present value approach? . Compute the approximate internal rate of return of each project. Which one should be adopted based on the interna rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 25P
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Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value
Transcribed Image Text:Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value
Required A Required B Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Project A Project B Which project should be adopted? Internal Rate of Return % %
Transcribed Image Text:Required A Required B Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Project A Project B Which project should be adopted? Internal Rate of Return % %
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