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) Note: Use appropriate factor(s) from the tables provided. Net Cash Flows Year Project 1 Initial investment $(42,000) 1. 10,500 27,800 18,500 2. 3. Project 2 $(78,000) 35,000 15,000 35,000 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? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred? Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places. Project 1 Project 2 Year Net Cash Flows Cumulative Net Cash Flows Net Cash Flows Cumulative Net Cash Flows Initial investment $ (42,000) $ (42,000) $ (78,000) $ (78,000)
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) Note: Use appropriate factor(s) from the tables provided. Net Cash Flows Year Project 1 Initial investment $(42,000) 1. 10,500 27,800 18,500 2. 3. Project 2 $(78,000) 35,000 15,000 35,000 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? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred? Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places. Project 1 Project 2 Year Net Cash Flows Cumulative Net Cash Flows Net Cash Flows Cumulative Net Cash Flows Initial investment $ (42,000) $ (42,000) $ (78,000) $ (78,000)
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 11P
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