Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $136,500. Project 2 requires an initial investment of $104,400. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Project 2 Net present value Present Value Net Cash Flows x of Annuity at 10% Project 1 $ 112,500 Present Value Net Cash Flows x of Annuity at 10% 75,400 19,500 9,280 $ 8,320 Present Value of Net Cash Flows Project 2 $ 89,000 Present Value of Net Cash Flows 37,120 20,880 23, 200 $ 7,800

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $136,500.
Project 2 requires an initial investment of $104,400. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV
of $1, PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Machinery
Selling, general, and administrative expenses
Income
Years 1-7
Project 1
Net present value
Years 1-5
Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2.
Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round
your answers to the nearest whole dollar.
Project 2
Net present value
Present Value
Net Cash Flows x of Annuity at
10%
Net Cash Flows x
Present Value
of Annuity at
10%
=
Project 1
$ 112,500
=
75,400
19,500
9,280
$ 8,320
Present Value of
Net Cash Flows
Project 2
$ 89,000
Present Value of
Net Cash Flows
37,120
20,880
23, 200
$ 7,800
Transcribed Image Text:Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $136,500. Project 2 requires an initial investment of $104,400. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value Years 1-5 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Project 2 Net present value Present Value Net Cash Flows x of Annuity at 10% Net Cash Flows x Present Value of Annuity at 10% = Project 1 $ 112,500 = 75,400 19,500 9,280 $ 8,320 Present Value of Net Cash Flows Project 2 $ 89,000 Present Value of Net Cash Flows 37,120 20,880 23, 200 $ 7,800
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