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ACCT 100 Compute the cash payback period for each project

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ACCT 100 Compute the cash payback period for each project

Ch 26 HW

  1. Question
  2. PR.26-1.AQuestion
  3. PR.26-2.A

Progress:2/2 items

  1. eBookCalculatorCash Payback Period, Net Present Value Method, and AnalysisElite 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 $ 450,000 $ 500,000
    2    450,000    400,000
    3    340,000    350,000
    4    280,000    250,000
    5    180,000    200,000
    Total $1,700,000 $1,700,000

    Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.

    Present Value of $1 at Compound Interest
    Year 6% 10% 12% 15% 20%
    1 0.943 0.909 0.893 0.870 0.833
    2 0.890 0.826 0.797 0.756 0.694
    3 0.840 0.751 0.712 0.658 0.579
    4 0.792 0.683 0.636 0.572 0.482
    5 0.747 0.621 0.567 0.497 0.402
    6 0.705 0.564 0.507 0.432 0.335
    7 0.665 0.513 0.452 0.376 0.279
    8 0.627 0.467 0.404 0.327 0.233
    9 0.592 0.424 0.361 0.284 0.194
    10 0.558 0.386 0.322 0.247 0.162

    Required:1a.  Compute the cash payback period for each project.

    Cash Payback Period
    Plant Expansion 2 years
    Retail Store Expansion 2 years

    1b.  Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.

    Plant Expansion Retail Store Expansion
    Present value of net cash flow total $ $
    Less amount to be invested $ $
    Net present value $ $