Exercise 24-9 (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 companys 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	Net Cash Flows
	Project 1	Project 2
Initial investment	$(42,000)	$(78,000)
1.	10,500	35,000
2.	27,800	15,000
3.	18,500	35,000

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 B

Compute net present value for each project. Based on net present value, which project is preferred? (Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar.)

	Net Cash Flows	Present Value Factor	Present Value of Net Cash Flows
Project 1
Year 1
Year 2
Year 3
Totals	$0		$0
Initial investment
Net present value			$0
Project 2
Year 1
Year 2
Year 3
Totals	$0		$0
Initial investment
Net present value			$0
Based on net present value, which project is preferred?