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Bridgeport Company is considering two new projects, each requiring an equipment investment of $98,200. Each project will last for three years and produce the following
Bridgeport Company is considering two new projects, each requiring an equipment investment of $98,200. Each project will last for three years and produce the following cash flows: Year Cool Hot 1 $38,400 $42,400 2 43,400 42,400 3 48,400 42,400 130,200 $127,200 The equipment will have no salvage value at the end of its three-year life. Bridgeport Company uses straight-line depreciation and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Period 12% 1 0.89286 2 0.79719 3 0.71178 Present Value of an Annuity of 1 Period 12% 1 0.89286 2 1.69005 3 2.40183 (a) Compute the net present value of each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answers to 0 decimal places, e.g. 5,275.) Project Cool Project Hot Net present value $ $
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