How to calculate the net present value for each project

FratBro23
Category:
Business & Finance
Price: $5 USD

Question description

Davis Company is considering two capital investment proposals. Estimates regarding each project are provided below.
 

Project A

Project B

Initial Investment

$800,000

$650,000

Annual Net Income

$50,000

45,000

Annual Cash Inflow

$220,000

$200,000

Salvage Value

$0

$0

Estimated Useful Life

5 years

4 years


 
The company requires a 10% rate of return on all new investments.
 
Part (a): Calculate the payback period for each project.
Part (b): Calculate the net present value for each project.
Part (c): Which project should Jackson Company accept and why?

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