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Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project...

Elite 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 $151,000 $127,000
2 124,000 148,000
3 107,000 102,000
4 97,000 71,000
5 30,000 61,000
Total $509,000 $509,000

Each project requires an investment of $275,000. A rate of 12% 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

Required:

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

Cash Payback Period
Plant Expansion (1, 2, 3, 4, or 5 years)
Retail Store Expansion (1, 2, 3, 4, or 5 years)

1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.

Plant Expansion Retail Store Expansion
Present value of net cash flow total $ $
Less amount to be invested $ $
Net present value $ $

2. Because of the timing of the receipt of the net cash flows, the (plant expansion / retail store expansion) offers a higher (net present value / net cash flow).

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