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 $440,000 $490,000 2 440,000 390,000 3 350,000 360,000 4 270,000 240,000 5 180,000 200,000 Total $1,680,000 $1,680,000 PV of $1 Compond Interest @ 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Compute the following for each product: Cash payback period. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)
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 $440,000 $490,000 2 440,000 390,000 3 350,000 360,000 4 270,000 240,000 5 180,000 200,000 Total $1,680,000 $1,680,000 PV of $1 Compond Interest @ 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Compute the following for each product: Cash payback period. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 3CMA
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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 |
$440,000 |
$490,000 |
|
2 |
440,000 |
390,000 |
|
3 |
350,000 |
360,000 |
|
4 |
270,000 |
240,000 |
|
5 |
180,000 |
200,000 |
|
Total |
$1,680,000 |
$1,680,000 |
PV of $1 Compond Interest @ 15%
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247
Each project has an initial investment of $900,000. A rate of 15% has been selected for
- Compute the following for each product:
- Cash payback period.
- The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2).
- Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)
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