VI. ABC Manufacturing Company is considering two new projects, each requiring an equipment investment of $22,000....

VI.

ABC Manufacturing Company is considering two new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following annual net cash inflows.

Year	BB	CC
1	$ 10,000	$14,000
2	10,000	10,000
3	10,000	6,000
Total	$30,000	$30,000

The equipment's salvage value is zero for each machine. Cepeda uses straight-line depreciation. Cepeda's minimum required rate of return is 12%.

Instructions

(a) Compute each project's payback period. (Round to two decimals.)

(b) Compute the net present value of each project. And clearly indicate the most desirable project if you are using only this method. (Round to nearest dollar.)

Solutions

Expert Solution

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