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ildhorseCompany is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $340000 $420000 Annual net income
ildhorseCompany is considering two capital investment proposals. Estimates regarding each project are provided below:
| Project Soup | Project Nuts | |
| Initial investment | $340000 | $420000 |
| Annual net income | 30000 | 46000 |
| Net annual cash inflow | 110000 | 146000 |
| Estimated useful life | 5 years | 6 years |
| Salvage value | 0 | 0 |
The company requires a 10% rate of return on all new investments.
| Present Value of an Annuity of 1 | ||||
| Periods | 9% | 10% | 11% | 12% |
| 5 | 3.89 | 3.791 | 3.696 | 3.605 |
| 6 | 4.486 | 4.355 | 4.231 | 4.111 |
The net present value for Project Nuts is
$260206.
$70000.
$635830.
$215830.
q44
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