Question
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
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.) YEARS NET CASH FLOW
Project 1 Project 2
| INITIAL INVESTMENT | $(34,000) | $(86,000) |
| 1 | 8,500 | 35,000 |
| 2 | 22,000 | 15,000 |
| 3 | 12,500 | 50,000 |
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?
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Fundamentals of Financial Accounting
Authors: Fred Phillips, Robert Libby, Patricia Libby
5th edition
978-0078025914
