Question

# Cash Payback Period, Net Present Value Method, and Analysis Elite Apparel Inc. is considering two investment...

Cash Payback Period, Net Present Value Method, and Analysis

Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:

 Year Plant Expansion Retail Store Expansion 1 \$150,000 \$126,000 2 123,000 147,000 3 106,000 101,000 4 96,000 71,000 5 30,000 60,000 Total \$505,000 \$505,000

Each project requires an investment of \$273,000. A rate of 12% has been selected for the net present value analysis.

 Present Value of \$1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162

Required:

1a. Compute the cash payback period for each project.

 Cash Payback Period Plant Expansion Retail Store Expansion

1b. Compute the net present value. Use the present value of \$1 table above. If required, round to the nearest dollar.

 Plant Expansion Retail Store Expansion Present value of net cash flow total \$ \$ Less amount to be invested \$ \$ Net present value \$ \$

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