Refer to the information in Exercise 26-1. Project 1 has a seven-year useful life, and Project 2 has a fiveyear useful life. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment.
Data From Exercise 26-1
Information for two alternative projects involving machinery investments follows.
Project 1 requires an initial investment of $135,000.
Project 2 requires an initial investment of $98,000. Compute
(a) Annual net cash flow and
(b) Payback period for each investment.
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