Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,700. Project 2 requires an initial investment of $100,800. Assume the company requires a 10% rate of return on its investments. (PV of $1. EV of $1. PVA of $1. and EVA 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 Incone Years 1-7 Project 1 Net present value Years 1-5 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 present value Present Value Net Cash Flows x of Annuity at 10% Net Cash Flows x Project 1 $ 108,900 Present Value of Annuity at 10% 72,800 19,100 8,960 $ 8,040 Present Value of Net Cash Flows Project 2 $ 85,800 Present Value of Net Cash Flows 35,840 20,160 22,400 $ 7,400
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,700. Project 2 requires an initial investment of $100,800. Assume the company requires a 10% rate of return on its investments. (PV of $1. EV of $1. PVA of $1. and EVA 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 Incone Years 1-7 Project 1 Net present value Years 1-5 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 present value Present Value Net Cash Flows x of Annuity at 10% Net Cash Flows x Project 1 $ 108,900 Present Value of Annuity at 10% 72,800 19,100 8,960 $ 8,040 Present Value of Net Cash Flows Project 2 $ 85,800 Present Value of Net Cash Flows 35,840 20,160 22,400 $ 7,400
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
Section: Chapter Questions
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Transcribed Image Text:Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $133,700.
Project 2 requires an initial investment of $100,800. Assume the company requires a 10% rate of return on its investments. (PV of $1.
EV of $1. PVA of $1. and EVA 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
Years 1-5
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 present value
Net Cash Flows
Net Cash Flows x
Present Value
of Annuity at
10%
Project 1
$ 108,900
Present Value
of Annuity at
10%
72,800
19,100
8,960
$ 8,040
Present Value of
Net Cash Flows
Project 2
$ 85,800
Present Value of
Net Cash Flows
35,840
20,160
22,400
$ 7,400
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