1. X-treme Vitamin Company is considering two investments, both of which cost $22,000. The cash flows are as follows:
| Year |
Project A |
Project B |
| 1 |
$ |
25,000 |
|
$ |
22,000 |
|
| 2 |
|
12,000 |
|
|
11,000 |
|
| 3 |
|
8,000 |
|
|
14,000 |
|
Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)
Project A year(s):
Project B year(s):
b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Project A:
Project B:
2. Aerospace Dynamics will invest $155,000 in a project that will produce the following cash flows. The cost of capital is 10 percent. (Note that the fourth year's cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
| Year |
Cash Flow |
| 1 |
|
$ |
45,000 |
|
| 2 |
|
|
57,000 |
|
| 3 |
|
|
60,000 |
|
| 4 |
|
|
(53,000 |
) |
| 5 |
|
|
125,000 |
|
a. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)