Each project requires an investment of $700,000. A rate of 15% has been selected

Question

Each project requires an investment of $700,000. A rate of 15% has been selected for the net present value analysis.

Required:

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

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

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

Explanation / Answer

. . . . . . Plant Expansion . . . . . . . . . . Retail Store Expansion
. . . . . . . . .747,311. . . . . . . . .. . . . . . . 749,191
. . . . . . . . .700,000 . . . . . . . . . . . . . . . 700,000
. . . . . . . . . .47,311 . . . . . . . . . . .. . . . . 49,191

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