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 EVA of $1) (Use appropriate factor(s) from the tables provided.) Year Initial investment 1. 2. 3. Net Cash Flowe Project 1 Project 2 $160,000) $(55,000) 15,000 35,000 25,200 20,000 22,500 20,000 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? Required A Required B Year 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 Cumulative Net Cumulative Net Cash Flows Net Cash Cash Flows Net Cash Flows Flows Initial Investment $ (60,000) $ (60,000) $ (55,000) (55,000) Year 1 15,000 (45,000) 35,000 (20,000) Year 2 25,200 (19,800) 20,000 Year 3 22,500 2,700 20,000 20,000 Payback period Project 1 Payback period years Project 2 Payback period years Based on payback period, which project is preferred? Project 2 0 Net Cash Flows Present Value Factor Present Value of Net Cash Flows Project 1 Year 1 $ Year 2 15,000 25,200 22,500 62,700 $ $ 0 $ 0 Year 3 Totals Initial investment Net present value Project 2 Year 1 Year 2 Year 3 Totals 35,000 20,000 20,000 75,000 $ $ 0 Initial investment $ 0 Net present value Based on net present value, which project is preferred