Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $136,500. Project 2 requires an initial investment of $104,400. 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) Note: 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 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. Note: 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 Net present value Present Value Net Cash Flows x of Annuity at 10% Project 1 $ 112,500 Present Value Net Cash Flows x of Annuity at 10% 75,400 19,500 9,280 $ 8,320 Present Value of Net Cash Flows Project 2 $ 89,000 Present Value of Net Cash Flows 37,120 20,880 23, 200 $ 7,800

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $136,500. Project 2 requires an initial investment of $104,400. 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) Note: 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 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. Note: 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 Net present value Present Value Net Cash Flows x of Annuity at 10% Project 1 $ 112,500 Present Value Net Cash Flows x of Annuity at 10% 75,400 19,500 9,280 $ 8,320 Present Value of Net Cash Flows Project 2 $ 89,000 Present Value of Net Cash Flows 37,120 20,880 23, 200 $ 7,800

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 4P

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