Dwight Donovan, the president of Vernon 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 Iife 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 $114,000 and for Project B are $38.000. The annual expected cash inflows are $29.309 for Project A and $10.542 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Vernon Enterprises' desired rate of return is 4 percent. (PV of $1 and PVA of \$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? Complete this question by entering your answers in the tabs below. 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.) Dwight Donovan, the president of Vernon 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 $114,000 and for Project B are $38,000. The annual expected cash inflows are $29,309 for Project A and $10,542 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Vernon Enterprises' desired rate of return is 4 percent. (PV of $1 and PVA of \$1) (Use appropriate foctor(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 retum approach? Complete this question by entering your answers in the tabs below. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Exercise 16-12A (Algo) Determining the payback period LO 16.4 Benson Airline Company is consideting expanding its terititory. The company has the opportunity to purchase one of two different used aliplanes. The first airplane is expected to cost $14,500,000; it witi enable the company to increase its aninual cash intlow by $5,800,000 per year. The plane is expected to have a useful life of five years and no salvage volue. The second phane conts $47,520,000; It will enable the company to increase annual cash flow by $9,900,000 per yeat. This plane has an eight year inelun lite and a zero salvage value. Required o. Determine the payback period for each investment alternative and identify the athemative Benson should accept if the decision is based on the payback approach. (Round your answers to 1 decimal ploce.) Exercise 16-14A (Algo) Determining the unadjusted rate of return LO 16.4 Perez Painting Company is considering whether to purchase a new spray paint machine that costs $2.400. The machine is expected to save labor, Increasing net income by $480 per year. The effective life of the machine is 15 years according to the marufacturer's estimate. Required a. Determine the unadjusted rate of retum based on the average cost of the investment. (Enter your answer os o whole percentnge (e.g. 0.55 should be entered as 55 ).)
