net present value 579775

Aug 29, 2021 | Uncategorized

Runway Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:

Each project requires an investment of $700,000. A rate of 15% 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:
Retail Store Expansion:

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.Prepare a brief report advising management on the relative merits of each project.

I have the correct answers, But I need an explanation as to how to calculate the Net Present Value for the Plant Expansion. I am confused because they have two years that will earn the same amount of cash flow…. Please Explain