Business, 11.06.2020 16:57 brandonholden

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

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.

Required:

1. Compute the cash payback period for each project.

2. Compute the net present value for each project.

(Round to nearest dollar)

Answers: 2

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Answers

Answer from: ethann47

Plant Expansion

Cash payback period = 2 years

NPV = $304,707.24

Retail Store Expansion

Cash payback period = 2 years

NPV = $309,744.42

Explanation:

Cash payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flows.

Cash payback for the Plant Expansion

Amount invested = $-900,000

Amount recovered in the first year = $-900,000 + $450,000 = $-450,000

Amount recovered in the second year = $-450,000 + $450,000 = 0

The amount invested in the project is recovered In the second year. So, the cash payback period is 2 years.

Cash payback for the Retail Store Expansion

Amount invested = $-900,000

Amount recovered in the first year = $-900,000 + $500,000 = $-400,000

Amount recovered in the second year = $-400,000 + $400,000 = 0

The amount invested in the project is recovered In the second year. So, the cash payback period is 2 years.

The net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator:

Plant Expansion

Cash flow in year 0 = $-900,000

Cash flow in year 1 = $450,000

Cash flow in year 2 = $450,000

Cash flow in year 3 = $340,000

Cash flow in year 4 = $280,000

Cash flow in year 5 = $180,000

I = 15%

NPV = $304,707.24

Retail Store Expansion

Cash flow in year 0 = $-900,000

Cash flow in year 1 = $500,000

Cash flow in year 2 = $400,000

Cash flow in year 3 = $350,000

Cash flow in year 4 = $250,000

Cash flow in year 5 = $200,000

I = 15%

NPV = $309,744.42

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

Answer from: Quest

send the charted data

Answer from: Quest

Answer:

the correct answer is economics is a game without winners or losers.

explanation:

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

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