1. a.
Initial investment:
Net Cash Cumulative Net Net Cash Cumulative Net
Flow Cash Flows Flow Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
The Plant Expansion project achieves payback in
1. b.
Present
Value of
Plant Retail Store Plant Retail Store
$1 at 15% Expansion Expansion Expansion Expansion
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Amount to be invested
Net present value
expansion project is recommended, based on its higher net present value.
2.
[Key essay answer here]
Problem 26(12)-2A
Name:
Section:
Net Cash Flow
Present Value of
Plant Expansion
Retail Store Expansion
Net Cash Flow
An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded.
Fill out the table in 1a completely, even after the payback period is reached.
1. a.
Initial investment:
Net Cash Cumulative Net Net Cash Cumulative Net
Flow Cash Flows Flow Cash Flows
Year 1 450,000$ 450,000$ 500,000$ 500,000$
1. b.
Present
Value of
Plant Retail Store Plant Retail Store
$1 at 15% Expansion Expansion Expansion Expansion
Year 1 0.870 450,000$ 500,000$ 391,500$ 435,000$
2.
The report can take many forms and should include, as a minimum, the following points:
$900,000
Net Cash Flow
Net Cash Flow
Present Value of
ON
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Score:
Instructions
Answers are entered in the cells with gray backgrounds.
Plant Expansion
Retail Store Expansion
Problem 26(12)-2A
Name:
Solution
Section: