# Finance capital investment decision | Business & Finance homework help

5 Capital investments

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Cash payback period, net present value method, and analysis

Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:

Each project requires an investment of \$480,000. A rate of 15% has been selected for the net present value analysis.

 Present Value of \$1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162

1. A.  Compute the cash payback period for each project.

 Cash payback period Plant Expansion: 1, 2,3.4, or 5yrs ? Retail Store Expansion: 1,2,3,4, 5yrs?

Plan expansion Payback Period is in 3 Years

Retail Store Expansion Payback Period is in 3 Years

1. B.  Compute the net present value. Use the present value of \$1 table above. If required, use the minus sign to indicate a negative net present value.

 Plant Expansion Retail Store Expansion Present value of net cash flow total: \$ 488,100 \$ 497,230 Amount to be invested: \$480,000 \$  480,000 Net present value: \$ 8,100 \$ 17,230

Net Present Value calculation of Plant Expansion

Net Present Value calculation of Retail Store Expansion

2.  Prepare a brief report advising management on the relative merits of each project. The input in the box below will not be graded, but may be reviewed and considered by others.