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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. 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 $163,000 $136,000
    2 133,000 160,000
    3 115,000 110,000
    4 104,000 77,000
    5 33,000 65,000
    Total $548,000 $548,000

    Each project requires an investment of $296,000. 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

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