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

Year Plant Expansion Retail Store Expansion1

1 $171,000 $143,000

2 140,000 168,000

3 121,000 115,000

4 109,000 81,000

5 34,000 68,000

Total $575,000 $575,000

Each project requires an investment of $311,000. A rate of 20% 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 $( ) $( )

2.Because of the timing of the receipt of the net cash flows, the ( )

offers a higher ( )

.