Question

Cash Payback Period, A method of analysis of proposed capital investments that focuses on the present value of the cash flows expected from the investments.Net Present Value Method, and Analysis

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	$123,000		$103,000
2	100,000		120,000
3	87,000		83,000
4	78,000		58,000
5	25,000		49,000
Total	$413,000		$413,000

Each project requires an investment of $223,000. A rate of 10% 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.

Plant Expansion	2 years 1 year 2 years 3 years 4 years 5 years
Retail Store Expansion	2 years 1 year 2 years 3 years 4 years 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

• plant expansion
• retail store expansion

offers a higher net present value

• net present value
• net cash flow

I need Help with part 1B, please show your work. answers I got were 322,282 and 318,734 for the present value of net cash flow total. However it keeps saying its wrong.

Answer 1

1b)
year	Plant Expansion Cash flows	Discount factor @10%	Present value
0		1	0
1	123000	0.909	111818.1818
2	100000	0.826	82644.6281
3	87000	0.751	65364.38768
4	78000	0.683	53275.04952
5	25000	0.621	15523.03308
	Present value of Cash flows total		328625.2802
	Less: Amount to be invested		223000
	Net present value		105625.2802
	Net present value		105625	Rouded off
year	Retail Store Expansion Cash flows	Discount factor @10%	Present value
0		1	0
1	103000	0.909	93636.36364
2	102000	0.826	84297.52066
3	83000	0.751	62359.12847
4	58000	0.683	39614.78041
5	49000	0.621	30425.14483
	Present value of Cash flows total		310332.938
	Less: Amount to be invested		223000
	Net present value		87332.93801
	Net present value		87333	Rouded off
2) Because of the timing of the reciept of the net cash flows, the plant expansion offers a higher net present value.