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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.)

Year Net Cash Flows
Project 1 Project 2
Initial investment $(60,000) $(57,500)
1. 15,000 35,000
2. 33,200 15,000
3. 20,000 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?

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