Problem 9.16

Cranjet Industries is expanding its product line and its production capacity. The costs and expected cash flows of the two independent projects are given in the following table. The firm uses a discount rate of 14.60 percent for such projects.

Year		Product Line Expansion			Production Capacity Expansion
0		$-2,592,200			$--9,872,700
1		503,500			1,905,600
2		746,200			1,905,600
3		761,400			1,905,600
4		899,100			2,587,800
5		696,400			2,849,500

a. What are the NPVs of the two projects? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round answers to 0 decimal places, e.g. 5,275.)

NPV of product line expansion is $_______________
NPV of production capacity expansion is $________________

b. Should both projects be accepted? or either? or neither?

Cranjet should accept

only the product line expansion, both projects, neither project or only the production capacity expansion