Dwight Donovan, the president of Thornton Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation the machine is expected to have a useful life of five years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment . Initial cash expenditures for Project A are $103.000 and for Project B are $34,000. The annual expected cash inflows are $25,121 for Project A and $8.969 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Thornton Enterprises desired rate of return is 6 percent. (PV of $1 and PVA OL$.1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate Internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? 50 56 1 Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places) Net Present Value Project Project Which project should be adopted? DL Required A Required B Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach Internal Rate of Return Project A Project B Which project should be adopted? % Daryl Kearns savea $200.000 during the 25 years that he worked for a major corporation. Now he has retired at the age of 50 and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportunities. Both investments require an initial payment of $185,000. The following table presents the estimated cash Inflows for the two alternatives: Year 1 Year 2 Year Year 4 Opportunity $ 55,700 $ 50,930 $78,940 $101,440 Opportunity #2 103,700 109,100 17.700 15,100 Mt. Kearns decides to use his past average return on mutual fund investments as the discount rate: It is 9 percent. PV of S1 and PVA of 5.1) (Use appropriate factor(s) from the tables provided.) Required . Compute the net present value of each opportunity. Which should Mr Kearns adopt based on the net present value approach? b. Compute the payback period for each project . Which should Mr. Kearns adopt based on the payback approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each opportunity. Which should Mr. Kearns adopt based on the net present value approach (Round your intermediate calculations and final answer to two decimal places Net Present Value Opportunity 1 Opportunity 2 a. Compute the net present value of each opportunity. Which should Mr. Kearns adopt based on the net present value appro b. Compute the payback period for each project. Which should Mr. Kearns adopt based on the payback approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the payback period for each opportunity. Which should Mr. Kearns adopt based on the payback approach? Payback Period Opportunity 1 Opportunity 2 Which opportunity should be chosen? years years Opportunity 2
