Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $130,900. Project 2 requires an initial investment of $97,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project 1 Years 1-7 Initial investment Net present value 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.) $ X Answer is complete but not entirely correct. Present Value of Annuity at 10% 4.8700 Net Cash Flows Project 1 $ 105,300 26,460 X 70, 200 18,700 8,640 $ 7,760 Present Value of Net Cash Flows $ IS Project 2 $ 82,600 34,560 19,440 21,600 $ 7,000 128,860 130,900✔ (2 082)✓
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $130,900. Project 2 requires an initial investment of $97,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project 1 Years 1-7 Initial investment Net present value 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.) $ X Answer is complete but not entirely correct. Present Value of Annuity at 10% 4.8700 Net Cash Flows Project 1 $ 105,300 26,460 X 70, 200 18,700 8,640 $ 7,760 Present Value of Net Cash Flows $ IS Project 2 $ 82,600 34,560 19,440 21,600 $ 7,000 128,860 130,900✔ (2 082)✓
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 4P
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