Reference no: EM133025862

Question - Dwight Donovan, the president of Rooney Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of three years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $117,000 and for Project B are $41,000. The annual expected cash inflows are $55,543 for Project A and $17,660 for Project B. Both investments are expected to provide cash flow benefits for the next three years. Rooney Enterprises' desired rate of return is 6 percent.

Required -

-Compute the net present value of each project. Which project should be adopted based on the net present value approach?

-Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach?

-Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.)

Net Present Value

Project A?

Project B?

Which project should be adopted?