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Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $137,900. Project 2 requires an initial investment of $106,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Annual Amounts | Project 1 | Project 2 |
---|---|---|
Sales of new product | $ 114,300 | $ 90,600 |
Expenses | ||
Materials, labor, and overhead (except depreciation) | 76,700 | 37,760 |
DepreciationMachinery | 19,700 | 21,240 |
Selling, general, and administrative expenses | 9,440 | 23,600 |
Income | $ 8,460 | $ 8,000 |
Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)
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