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Gabbana's Company is considering two new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following
Gabbana's Company is considering two new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows. Year X 1 $7,000 $13,000 2 9.000 12,000 3 12.000 11.000 Total $28.000 $36,000 The equipment's salvage value is zero, and Gabbana uses straight-line depreciation. Gabbana will not accept any project with a cash payback period over 2 years. Gabbana's required rate of return is 12%. Instructions: A. Compute each project's payback period, indicating the most desirable project and the least desirable project using this method (round to two decimals and assume in your computations that cash flows occur evenly throughout the year). B. Compute the net present value of each project. Does your evaluation change? (round to nearest dollar). Edit View Insert Enrmat Tools Table
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