Question

Hello, I am struggling with this homework problem for my accounting class. Thank you for the help!

Cash Payback period, Net Present Value Method, and Analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Year Plant Expansion Retail Store Expansion $126,000 $105,000 103,000 124,000 89,000 85,000 81,000 59,000 25,000 51,000 Total $424,000 $424,000 Each project requires an investment of $229,000. A rate of 12% has been selected for the nel present value analysis. Year 1 2 Present Value of $i at Compound Interest 6% 10% 12% 15% 20% 0.943 0.9090.893 0.870 0.833 0.890 0.826 0.797 0.756 0.594 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162

Answer 1

Plant Expansion Retail Store Expansion Cumulative Cumulative Cash Flows Cash flows Cash Flows Cash flows -229000 -229000 -229000 126000 -103000 105000 -124000 103000 124000 89000 89000 85000 85000 81000 170000 59000 144000 25000 195000 51000 195000 Payback Period 2 Year 2 Years Year 2 Table Value @ 12% 0.893 0.797 0.712 0.636 0.567 P lant Expansion Retail Store Expansion Cash Flows PVCF Cash Flows PVCF 126000 112518 105000 93765 1030001 82091 124000 98828 890001 63368 85000 60520 81000 51516 59000 37524 25000 14175 51000 28917 323668 319554 5

Answer (Cash Pay Back) Plant Expansion Retail Store Expansion 2.00 2.00 Years Years Answers (NPV) Plant Expansion 323668 229000 94668 Retail Store Expansion 319554 229000 90554 Less : Amount to be invested Net present Value