FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on
investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Year
Initial investment
1.
2.
3.
Net Cash Flows
Project 1
$(60,000)
15,000
27,400
22,000
Project 2
$(55,500)
35,000
15,000
22,000
a. Compute payback period for each project. Based on payback period, which project is preferred?
b. Compute net present value for each project. Based on net present value, which project is preferred?
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Transcribed Image Text:Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 1. 2. 3. Net Cash Flows Project 1 $(60,000) 15,000 27,400 22,000 Project 2 $(55,500) 35,000 15,000 22,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred?
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