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Item1 20points eBook Print References Check my workCheck My Work button is now enabled Item 1 Dwight Donovan, the president of Perez Enterprises, is considering
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Item 1
Dwight Donovan, the president of Perez Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of three years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $113,000 and for Project B are $31,000. The annual expected cash inflows are $53,644 for Project A and $13,803 for Project B. Both investments are expected to provide cash flow benefits for the next three years. Perez Enterprises desired rate of return is 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required
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Compute the net present value of each project. Which project should be adopted based on the net present value approach?
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Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach?
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