PR 26-2A Cash Payback Period, Net Present Value Method, and Analysis Obj. 2, 3 Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Year Plant Expansion Retail Store Expansion 1 $ 450,000 $ 500,000 2 450,000 400,000 3 340,000 350,000 4 280,000 250,000 5 180,000 200,000 Total $1,700,000 $1,700,000 Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each product: 2. a. Cash payback period. b. The net present value. Use the present value table appearing in Exhibit 2 of this chapter. Answer Prepare a brief report advising management on the relative merits of each project. 1. a. Initial investment: Plant Expansion Net Cash Flow Year 1 $ 450,000 Cumulative Net Cash Flows $ 450,000 Year 2 450,000 Year 3 340,000 Year 4 280,000 Year 5 180,000 Retail Store Expansion Net Cash Cumulative Net Flow Cash Flows The Plant Expansion project achieves payback in Year 2 The Retail Store Expansion project achieves payback in Year 2 Either expansion project is recommended, based on the cash payback period. 2. Year 1 Year 2 Year 3 Year 4 Year 5 Total Present Value of $1 at 15% Amount to be invested Net present value [Key essay answer here] Net Present Value Analysis Present Value of Net Cash Flow Retail Store Net Cash Flow Plant Expansion Retail Store Expansion Plant Expansion expansion project is recommended, based on its h Expansion Enter as a negative