How to calculate the net present value for each project

timer Asked: Mar 30th, 2014

Question description

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

Project A

Project B

Initial Investment



Annual Net Income



Annual Cash Inflow



Salvage Value



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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