Shenzhen Industries is preparing to invest in the U.S. There are two potential projects that are believed to create positive returns for the company. The initial capitals for both projects are estimated at USD 2,000,000. Unfortunately, due to budget constraint, Shenzhen Industries has to drop one of the projects. The following table presents the estimated discount rates and after-tax future cash flows of each project for 5 consecutive years. Choose the most feasible project for the company by using the Net Present Value (NPV) approach. Cash flows Project : Chicago Project : Florida USD 600,000 USD 600,000 USD 600,000 USD 600,000 USD 600,000 Year 1 USD 1,000,000 USD 800,000 USD 600,000 USD 400,000 USD 200,000 Year 2 Year 3 Year 4 Year 5 Discount rate 9% 15%

Shenzhen Industries is preparing to invest in the U.S. There are two potential projects that are believed to create positive returns for the company. The initial capitals for both projects are estimated at USD 2,000,000. Unfortunately, due to budget constraint, Shenzhen Industries has to drop one of the projects. The following table presents the estimated discount rates and after-tax future cash flows of each project for 5 consecutive years. Choose the most feasible project for the company by using the Net Present Value (NPV) approach. Cash flows Project : Chicago Project : Florida USD 600,000 USD 600,000 USD 600,000 USD 600,000 USD 600,000 Year 1 USD 1,000,000 USD 800,000 USD 600,000 USD 400,000 USD 200,000 Year 2 Year 3 Year 4 Year 5 Discount rate 9% 15%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...

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