Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $128,800. Project 2 requires an initial investment of $94,500. 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)
Note: Use appropriate factor(s) from the tables provided.
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Machinery
Selling, general, and administrative expenses
Income
Project 1 Project 2
$ 102,600 $ 80,200
68,250 33,600
18,400 18,900
8,400 21,000
$ 7,550 $ 6,700
Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2.
Note: 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.
Present Value
Project 1 Net Cash Flows x of Annuity at Present Value of
Net Cash Flows
Years 1-7 10%
$ 0
Net present value
Project 2 Net Cash Flows x Present Value
of Annuity at Present Value of
Net Cash Flows
Years 1-5 10%
$ 0
Net present value
