# How to calculate the net present value for each project

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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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