Question
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $202,500. Project 2 requires an initial investment of $138,000.
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $202,500. Project 2 requires an initial investment of $138,000.
| Annual Amounts | Project 1 | Project 2 |
|---|---|---|
| Sales of new product | $ 136,000 | $ 116,000 |
| Expenses | ||
| Materials, labor, and overhead (except depreciation) | 74,000 | 41,000 |
| DepreciationMachinery | 29,000 | 27,000 |
| Selling, general, and administrative expenses | 17,000 | 29,000 |
| Income | $ 16,000 | $ 19,000 |
(a) Compute each projects annual net cash flow. (b) Compute payback period for each investment.
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Principles Of Finance
Authors: Scott Besley, Eugene F. Brigham
3rd Edition
0324232624, 9780324232622
