Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,000.Project 2 requires an initial investment of $98,000. Assume the company requires a 10% rate of return on its investments. (PV of $1. FVof $1, PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided.)Annual AmountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation-MachinerySelling, general, and administrative expensesIncomeYears 1-7Project 1Net present valueYears 1-5Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net presentvalues should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearestwhole dollar.)Project 2Net present valueNet Cash FlowsNet Cash FlowsXxPresent Valueof Annuity at10%Project 1$ 100,000Present Valueof Annuity at10%65,00020,0008,000$ 7,099Present Value ofNet Cash FlowsProject 2$ 80,000Present Value ofNet Cash Flows32,89818,09029,898$ 10,000

Net present value (NPV) of an alternative/project refers to the difference between the initial…

3 10,000 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)

3 10,000 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)

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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