1. PR.25-02A.ALGOCash Payback Period, Net Present Value Method, and AnalysisElite Apparel Inc. is considering...1....

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Accounting

1. PR.25-02A.ALGO
Cash Payback Period, Net Present Value Method, and Analysis
Elite Apparel Inc. is considering two investment projects. Theestimated net cash flows from each project are as follows:
Year Plant Expansion Retail Store Expansion
1 $167,000 $140,000
2 137,000 164,000
3 118,000 112,000
4 107,000 79,000
5 33,000 67,000
Total $562,000 $562,000
Each project requires an investment of $304,000. A rate of 20%has been selected for the net present value analysis.
Present Value of $1 at CompoundInterest
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 eachproject.
Cash Payback Period
Plant Expansion
Retail Store Expansion
1b. Compute the net present value. Use thepresent value of $1 table above. If required, round to the nearestdollar.
Plant Expansion Retail Store Expansion
Present value of net cash flow total $ $
Less amount to be invested $ $
Net present value $ $
2. Because of the timing of the receipt of thenet cash flows, the offers ahigher .

Answer & Explanation Solved by verified expert

3.8 Ratings (593 Votes)

Ans 1 A Plant Expansion Year Cash Inflow Cumulative cash flow Cash Outflow 1 167000 167000 304000 2 137000 304000 3 118000 422000 4 107000 529000 5 33000 562000 Since in 2 years cash outflow cash inflow therefore payback period 2 years Retail Store Expansion See Answer

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In: Accounting1. PR.25-02A.ALGOCash Payback Period, Net Present Value Method, and AnalysisElite Apparel Inc. is considering...1. PR.25-02A.ALGOCash Payback Period, Net Present Value Method, and AnalysisElite Apparel Inc. is considering two investment projects. Theestimated net cash flows from each project are as follows:YearPlant ExpansionRetail Store Expansion1$167,000$140,0002137,000164,0003118,000112,0004107,00079,000533,00067,000Total$562,000$562,000Each project requires an investment of $304,000. A rate of 20%has been selected for the net present value analysis.Present Value of $1 at CompoundInterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Required:1a. Compute the cash payback period for eachproject.Cash Payback PeriodPlant ExpansionRetail Store Expansion1b. Compute the net present value. Use thepresent value of $1 table above. If required, round to the nearestdollar.Plant ExpansionRetail Store ExpansionPresent value of net cash flow total$$Less amount to be invested$$Net present value$$2. Because of the timing of the receipt of thenet cash flows, the offers ahigher .

Year	Plant Expansion	Retail Store Expansion
1	$167,000	$140,000
2	137,000	164,000
3	118,000	112,000
4	107,000	79,000
5	33,000	67,000
Total	$562,000	$562,000

Present Value of $1 at CompoundInterest
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

	Cash Payback Period
Plant Expansion
Retail Store Expansion

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