Petrosino Company is considering two possible investments, each of which requires an initial investment of $24,000. Investment A will provide a cash flow of $6,000 at the end of each year for 6 years. Investment B will provide a cash flow of $8,000 at the end of each year for 4 years. Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) Read the requirements Begin by selecting the formula and then entering the amounts to calculate the payback period for each investment. Incremental amount invested 1 Incremental cash inflow from operations Payback period Investment A $ 24.000 1$ 6,000 4 years Investment B $ 24,000 1$ 8,800 3 years Which investment is most desirable using the payback method? Investment B Requirement 2. Compute the NPV of each investment using a required rate of return of 5% Which investment is most desirable using the NPV method? Begin by calculating the not present value (NPV) of investment A. (Enter the present value factor to four decimal places, "X.XXXX." Round dollar amounts the nearest whole number. Use a minus sign or parentheses for a negative net present value.) Present value of Ordinary Annuity of $1 Annual Cash Total Present at 6 years, 5% Inflow Value Net present value: Present value of annuity of equal annual net cash inflows 6,000 .7462 per year = 4,477 Less: Initial investment Net present value Data Table - X Present Value of $1 Period 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 25% 1 9709 .9615 9524 .9434 9346 .9259 9091 8929 .87728621 .8475 8333 .8000 2 .9426 .9246 .9070 .8900 .8734 .8573 .8264 .7972 .7695 7432 .7182 .6944 .6400 3 .9151 .8890 .8638 .8396 .8163 .7938 -7513 .7118 .6750 .6407 .6086 .5787 .5120 4 .8885 .8548 8227 .7921 .7629 .7350 .6830 .6355 .5921 .5523 .5158 .4823 4096 5 5 .8626 .8219 .7835 .7473 7130 6806 .6209 .5674 .5194 4761 4371 4019 .3277 6 .8375 .7903 .7462 .7050 .6663 .6302 .5645 5066 .4556 4104 .3704 .3349 2621 7 .8131 .7599 .7107 .6651 6227 15835 .5132 .4523 .3996 3538 .3139 2791 2097 8 .7894 .7307 .6768 .6274 .5820 15403 4665 4039 .3506 3050 .2660 2326 .1678 9 7664 .7026 .6446 .5919 ,5439 5002 4241 3606 .3075 2630 2255 1938 .1342 10 .7441 .6756 6139 .5584 5083 4632 .3855 .3220 2697 2267 .1911 1615 1074 12 .7014 .6246 .5568 4970 4440 .3971 3186 2567 2076 . 1685 1372 1122 .0687 15 .6419 .5553 .4810 4173 .3624 .3152 2394 1827 .0835 0649 0352 18 .5874 .1401 1079 .0946 .0691 .4936 4155 3503 .2959 .2502 .1799 .1300 .0508 .0376 .0180 20 5537 4564 3769 .3118 2584 .2145 .1486 .1037 .0728 .0514 0365 0261 .0115 25 4776 3751 2953 2330 .1842 .1460 .0923 .0588 .0378 .0245 .0160 .0105 .0038 28 4371 3335 2551 .1956 .1504 1159 .0693 .0419 .0255 .0157 .0097 0061 .0019 30 .4120 .3083 .2314 . 1741 .1314 .0994 .0573 .0334 .0196 0116 .0070 .0042 .0012 Pe loy Data Table Re Be 4% 8% > ny ny VH ce d Present Value of Ordinary Annuity of $1 Period 3% 5% 6% 7% 10% 12% 14% 16% 18% 20% 25% 1 .9709 .9615 .9524 .9434 .9346 9259 9091 .8929 .8772 .8621 .8475 .8333 8000 2 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7355 1.6901 1.6467 1.6052 1.5656 1.5278 1.4400 3 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.4869 2.4018 2.3216 2.2459 2.1743 2.1065 1.9520 4 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.1699 3.0373 2.9137 2.7982 2.6901 2.5887 2.3616 5 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.7908 3.6048 3.4331 3.2743 3.1272 2.9906 2.6893 6 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.3553 4.1114 3.8887 3.6847 3.4976 3.3255 2.9514 7 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 4.8684 4.5638 4.2883 4.0386 3.8115 3.6046 3.1611 8 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.3349 4.9676 4.6389 4.3436 4.0776 3.8372 3.3289 9 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.7590 5.3282 4.9464 4.6065 4.3030 4.0310 3.4631 10 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.1446 5.6502 5.2161 4.8332 4.4941 4.1925 3.5705 12 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 6.8137 6.1944 5.6603 5.1971 4.7932 4.4392 3.7251 15 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 7.6061 6.8109 6.1422 5.5755 5.0916 4.6755 3.8593 18 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.2014 7.2497 6.4674 5.8178 5.2732 4.8122 3.9279 20 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 8.5136 7.4694 6.6231 5.9288 5.3527 4.8696 3.9539 25 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.0770 7.8431 6.8729 6.0971 5.4669 4.9476 3.9849 28 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 9.3066 7.9844 6.9607 6.1520 5.5016 4.9697 3.9923 30 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 9.4269 8.0552 7.0027 6.1772 5.5168 4.9789 3.9950 i Requirements - 1. Determine the payback period for each investment. Which investment is most desirable using the payback doethod? 2. Compute the NPV of each investment using a required rate of return of 5%. Which investment is most desirable using the NPV method? 3. Explain why the payback method does not lead to an optimal decision for the Petrosino Company