Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $132,300. Project 2 requires an initial investment of $99,000. Assume the company requires a 10% rate of return on its investments. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounte Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project 2 Project 1 $ 107,100 Net present value 71,500 18,900 8,800 $ 7,900 Present Value Net Cash Flows x of Annuity at 10% $ (132,300) Project 2 $ 84,200 Present Value Net Cash Flows x of Annuity at 10% 35,200 19,800 22,000 $ 7,200 Present Value of Net Cash Flows $ 0: Present Value of Net Cash Flows $

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $132,300. Project 2 requires an initial investment of $99,000. Assume the company requires a 10% rate of return on its investments. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounte Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project 2 Project 1 $ 107,100 Net present value 71,500 18,900 8,800 $ 7,900 Present Value Net Cash Flows x of Annuity at 10% $ (132,300) Project 2 $ 84,200 Present Value Net Cash Flows x of Annuity at 10% 35,200 19,800 22,000 $ 7,200 Present Value of Net Cash Flows $ 0: Present Value of Net Cash Flows $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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