Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limite resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a raining program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required . Compute the net present value of each project. Which project should be adopted based on the net present value approach? . Compute the approximate internal rate of return of each project. Which one should be adopted based on the interna rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value
Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limite resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a raining program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required . Compute the net present value of each project. Which project should be adopted based on the net present value approach? . Compute the approximate internal rate of return of each project. Which one should be adopted based on the interna rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited
resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory
automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a
training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for
Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and
$15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell
Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables
provided.)
Required
a. Compute the net present value of each project. Which project should be adopted based on the net present value
approach?
b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal
rate of return approach?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute the net present value of each project. Which project should be adopted based on the net present value approach?
(Round your final answers to 2 decimal places.)
Project A
Project B
Which project should be adopted?
Net Present Value
Transcribed Image Text:Required A Required B
Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of
return approach?
Project A
Project B
Which project should be adopted?
Internal Rate of Return
%
%
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