Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investmentof $133,000. Project 2 requires an initial investment of $99,900. Assume the company requires a 10% rate of return onits investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)Annual AmountsSales of new productExpensesMaterials, labor, and overhead (exceptdepreciation)Depreciation MachinerySelling, general, and administrativeexpensesIncomeYears 1-7Project 1Net present valueYears 1-5Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4decimals. Round your answers to the nearest whole dollar.)Project 2Net present valueNet CashFlowsNet CashFlowsXXPresentValue ofAnnuity at10%PresentValue ofAnnuity at10%=Project 1 Project 2$108,000=72,15019,0008,880$ 7,970$ 85,000PresentValue of NetCash Flows35,52019,98022, 200$ 7,300PresentValue of NetCash Flows

Time value of money :— According to this concept, value of money in present day is greater than the…

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,000. Project 2 requires an initial investment of $99,900. 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) (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 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (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 1 Net present value Years 1-5 Project 2 Net present value Net Cash Flows Net Cash Flows X X Present Value of Annuity at 10% Present Value of Annuity at 10% = Project 1 Project 2 $ $ 85,000 108,000 = 72,150 19,000 8,880 $ 7,970 Present Value of Net Cash Flows 35,520 19,980 22, 200 $ 7,300 Present Value of Net Cash Flows

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,000. Project 2 requires an initial investment of $99,900. 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) (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 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (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 1 Net present value Years 1-5 Project 2 Net present value Net Cash Flows Net Cash Flows X X Present Value of Annuity at 10% Present Value of Annuity at 10% = Project 1 Project 2 $ $ 85,000 108,000 = 72,150 19,000 8,880 $ 7,970 Present Value of Net Cash Flows 35,520 19,980 22, 200 $ 7,300 Present Value of Net Cash Flows

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 4P

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