1 2 2. Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: 3 4 5 Total Year Plant Expansion $440,000 440,000 350,000 270,000 180,000 $1,680,000 Retail Store Expansion $490,000 390,000 360,000 240,000 200,000 $1,680,000 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Problem 2 Instructions a. Compute the following for each product: i. Cash payback period. ii. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). b. Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)

1 2 2. Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: 3 4 5 Total Year Plant Expansion $440,000 440,000 350,000 270,000 180,000 $1,680,000 Retail Store Expansion $490,000 390,000 360,000 240,000 200,000 $1,680,000 Each project has an initial investment of $900,000. A rate of 15% has been selected for net present value analysis. Problem 2 Instructions a. Compute the following for each product: i. Cash payback period. ii. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). b. Prepare a brief report advising management on the relative merits of each project. (Minimum two full paragraphs.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...

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