## Project Investment Analysis### Project Overview**Project 1:**- Initial Investment: $130,900- Sales of new product: $105,300**Project 2:**- Initial Investment: $97,200- Sales of new product: $82,600### Annual Expenses**Project 1:**- Materials, labor, and overhead (except depreciation): $70,200- Depreciation—Machinery: $18,700- Selling, general, and administrative expenses: $8,640**Project 2:**- Materials, labor, and overhead (except depreciation): $34,560- Depreciation—Machinery: $19,440- Selling, general, and administrative expenses: $21,600### Income- Project 1: $7,760- Project 2: $7,000### Investment CalculationCompute the net present value (NPV) for each potential investment, assuming a 10% rate of return.- Use 7 years for Project 1 and 5 years for Project 2.- Round the present value factor to 4 decimals.- Round answers to the nearest whole dollar.- Indicate negative net present values with a minus sign.### NPV Calculation Table#### Project 1- **Years 1-7** - **Net Cash Flows**: To be calculated - **Present Value of Annuity at 10%**: To be calculated - **Present Value of Net Cash Flows**: To be calculated#### Project 2- **Years 1-5** - **Net Cash Flows**: To be calculated - **Present Value of Annuity at 10%**: To be calculated - **Present Value of Net Cash Flows**: To be calculatedThe table is designed for calculating the present value of net cash flows by multiplying the net cash flows by the present value of annuity factor at 10% for the respective years of each project. ### Investment Analysis for Machinery ProjectsThis section presents financial data for evaluating two alternative projects involving machinery investments. The company seeks a 10% rate of return on its investments. Detailed financial information for both projects is outlined below.#### Annual Amounts| Description | Project 1 | Project 2 ||-------------------------------------------------------|-------------|------------|| **Sales of new product** | $105,300 | $82,600 || **Expenses** | | || - Materials, labor, and overhead | $70,200 | $34,560 || - Depreciation—Machinery | $18,700 | $19,440 || - Selling, general, and administrative expenses | $8,640 | $21,600 || **Income** | $7,760 | $7,000 |#### Net Present Value (NPV) CalculationCompute the net present value for each investment opportunity. Use a period of 7 years for Project 1 and 5 years for Project 2. Negative values are prefixed with a minus sign. Present value factors should be rounded to four decimal places, and final answers to the nearest whole dollar.##### Project 1 NPV Calculation- **Net Cash Flows**: [Details to be filled based on actual cash flow data]- **Present Value of Annuity at 10%**: [Factor to be used]- **Present Value of Net Cash Flows**: $[Result]##### Project 2 NPV Calculation- **Net Cash Flows**: [Details to be filled based on actual cash flow data]- **Present Value of Annuity at 10%**: [Factor to be used]- **Present Value of Net Cash Flows**: $[Result]The table provides a structured approach to compare the financial viability of the two projects and decide on the best investment based on the Net Present Value method.

Name: ## Project Investment Analysis### Project Overview**Project 1:**- Ini
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Description: ## Project Investment Analysis### Project Overview**Project 1:**- Initial Investment: $130,900- Sales of new product: $105,300**Project 2:**- Initial Investment: $97,200- Sales of new product: $82,600### Annual Expenses**Project 1:**- Materials, lab

The difference between the current value of cash inflows and outflow of cash over a period of time…

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Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $130,900. Project 2 requires an initial investment of $97,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value 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.) Project 2 Net Cash Flows X Net Cash Flows x Present Value of Annuity at 10% Present Value of Annuity at 10% = Project 1 $ 105,300 = 70,200 18,700 8,640 $ 7,760 Present Value of Net Cash Flows $ 0 Project 2 $ 82,600 Present Value of Net Cash Flows 34,560 19,440 21,600 $ 7,000

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $130,900. Project 2 requires an initial investment of $97,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Years 1-7 Project 1 Net present value 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.) Project 2 Net Cash Flows X Net Cash Flows x Present Value of Annuity at 10% Present Value of Annuity at 10% = Project 1 $ 105,300 = 70,200 18,700 8,640 $ 7,760 Present Value of Net Cash Flows $ 0 Project 2 $ 82,600 Present Value of Net Cash Flows 34,560 19,440 21,600 $ 7,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

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