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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