Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Exercise 11-9 (Algo) Payback period; net present value; unequal cash flows LO P1, P3 Gonzalez Company is considering two new projects with the following
Exercise 11-9 (Algo) Payback period; net present value; unequal cash flows LO P1, P3 Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 1. 2. 3. Net Cash Flows Project 1 $(50,000) 10,000 25,300 30,000 Project 2 $(70,000) 35,000 22,000 25,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred? (Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.) Project 1 Project 2 Year Net Cash Flows Cumulative Net Cash Flows Net Cash Flows Cumulative Net Cash Flows Initial investment $ (50,000) $ (70,000) Year 1 Year 2 Year 3 Payback period Project 1 Payback period Project 2 Payback period Based on payback period, which project is preferred? 0 0 years years < Required A Required B > 0 0
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started