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Valley Products, Inc. is considering two independent investments having the following cash flow streams: Year 0 1 2 Project A -$45,000 +20,000 +15,000 +15,000 +6,000
Valley Products, Inc. is considering two independent investments having the following cash flow streams: Year 0 1 2 Project A -$45,000 +20,000 +15,000 +15,000 +6,000 +6,000 Project B -$55,000 +15,000 +15,000 +10,000 +7,000 +35,000 3 4 5 Valley uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. It requires that all projects have a positive net present value when cash flows are discounted at 10 percent and that all projects have a payback no longer than three years. Which project or projects should the firm accept? Use Table II to answer the questions. Round your answers to the nearest whole number. Project A Project B Payback years years NPV Is the project acceptable? -Select- -Select- TABLE II Present Value Interest Factor (PVIF) ($1 at i % per period for n periods); 1 PVIF PV,FV,(PVIF,) (1 + i)" Period n 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 24 25 30 40 50 60 1% 1.000 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.788 0.780 0.742 0.672 0.608 0.550 2% 39 1.000 1.000 0.980 0.971 0.961 0.943 0.942 0.915 0.924 0.889 0.906 0.863 0.888 0.838 0.871 0.813 0.853 0.789 0.837 0.766 0.820 0.744 0.804 0.722 0.788 0.701 0.773 0.681 0.758 0.661 0.743 0.642 0.728 0.623 0.714 0.605 0.700 0.587 0.686 0.570 0.673 0.554 0.622 0.492 0.610 0.478 0.552 0.412 0.453 0.307 0.372 0.228 0.305 0.170 4% 1.000 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.390 0.375 0.308 0.208 0.141 0.095 5% 1.000 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0.377 0.310 0.295 0.231 0.142 0.087 0.054 6% 1.000 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.247 0.233 0.174 0.097 0.054 0.030 7% 1.000 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.276 0.258 0.197 0.184 0.131 0.067 0.034 0.017 8% 1.000 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 0.158 0.146 0.099 0.046 0.021 0.010 9% 1.000 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.126 0.116 0.075 0.032 0.013 0.006 10% 1.000 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.102 0.092 0.057 0.022 0.009 0.003 11% 1.000 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 0.082 0.074 0.044 0.015 0.005 0.002 12% 1.000 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.066 0.059 0.033 0.011 0.003 0.001 13% 1.000 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 0.053 0.047 0.026 0.008 0.002 0.001 Period n 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 24 25 30 40 50 60 14% 1.000 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.043 0.038 0.020 0.005 0.001 0.000 15% 1.000 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.081 0.070 0.061 0.035 0.030 0.015 0.004 0.001 0.000 16% 1.000 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 17% 1.000 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 0.023 0.020 0.009 0.002 0.000 0.000 18% 1.000 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.019 0.016 0.007 0.001 0.000 0.000 19% 1.000 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.074 0.062 0.052 0.044 0.037 0.031 0.015 0.013 0.005 0.001 0.000 0.000 20% 1.000 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.013 0.010 0.004 0.001 0.000 0.000 24% 1.000 0.806 0.650 0.524 0.423 0.341 0.275 0.222 0.179 0.144 0.116 0.094 0.076 0.061 0.049 0.040 0.032 0.026 0.021 0.017 0.014 0.006 0.005 0.002 0.000 0.000 0.000 28% 32% 1.000 1.000 0.781 0.758 0.610 0.574 0.477 0.435 0.373 0.329 0.291 0.250 0.227 0.189 0.178 0.143 0.139 0.108 0.108 0.082 0.085 0.062 0.066 0.047 0.052 0.036 0.040 0.027 0.032 0.021 0.025 0.016 0.019 0.012 0.015 0.009 0.012 0.007 0.009 0.005 0.007 0.004 0.003 0.001 0.002 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 36% 1.000 0.735 0.541 0.398 0.292 0.215 0.158 0.116 0.085 0.063 0.046 0.034 0.025 0.018 0.014 0.010 0.007 0.005 0.004 0.003 0.002 0.001 40% 1.000 0.714 0.510 0.364 0.260 0.186 0.133 0.095 0.068 0.048 0.035 0.025 0.018 0.013 0.009 0.006 0.005 0.003 0.002 0.002 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.125 0.108 0.093 0.080 0.069 0.060 0.051 0.028 0.024 0.012 0.003 0.001 0.000 0.000 0.000 0.000 0.000 0.000
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