Dwight Donovan, the president of Donovan 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 măchine that will enáble factory automation: the machine iş 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 Intial cash expenditures for Projec A are $400 000 and for Project B are S160.000. The annual expected cash inflows are S126,000 for Projęct A and $52,800 for Project B. Both investments are expected to provide Pape 472 Required Compute the net present value of cach project. Which project should be adopted based on the net present value approach? Round your computations to two decimal points. .Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return Compare the net present value approach with the internal rate of return approach. Which method is better in the given circumstances? Why?
Dwight Donovan, the president of Donovan 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 măchine that will enáble factory automation: the machine iş 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 Intial cash expenditures for Projec A are $400 000 and for Project B are S160.000. The annual expected cash inflows are S126,000 for Projęct A and $52,800 for Project B. Both investments are expected to provide Pape 472 Required Compute the net present value of cach project. Which project should be adopted based on the net present value approach? Round your computations to two decimal points. .Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return Compare the net present value approach with the internal rate of return approach. Which method is better in the given circumstances? Why?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 25P
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