Brief report advising management on the relative merits

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Reference no: EM13179180

Be You 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

$170,000

$200,000

2

170,000

160,000

3

140,000

120,000

4

110,000

120,000

5

120,000

110,000

Total

$710,000

$710,000

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

Instructions

1. Compute the following for each product:

a.   Cash payback period.

b.  The net present value. Use the present value of $1 table appearing in this chapter.

2. Prepare a brief report advising management on the relative merits of each project.

Reference no: EM13179180

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