3/20/2021 Question 1 - Wk 2 - Practice: Planning for Capital Investments [due Sat] - Connect
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Dwight Donovan, the president of Baird Enterprises, is considering two investment
opportunities. Because of limited resources, he will be able to invest in only one of
them. Project A is to purchase a machine that will enable factory automation; the
machine is expected to have a useful life of five years and no salvage value. Project
B supports a training program that will improve the skills of employees operating
the cu
ent equipment. Initial cash expenditures for Project A are $105,000 and fo
Project B are $32,000. The annual expected cash inflows are $26,995 for Project A
and $8,877 for Project B. Both investments are expected to provide cash flow
enefits for the next five years. Baird Enterprises’ desired rate of return is 6 percent.
(PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
Required
a. Compute the net present value of each project. Which project should be adopted
ased on the net present value approach?
. Compute the approximate internal rate of return of each project. Which one
should be adopted based on the internal rate of return approach?
Required A Required B
Complete this question by entering your answers in the tabs below.
Compute the net present value of each project. Which project should be adopted based o
(Round your final answers to 2 decimal places.)
Required A Required B
Net Present Value
Project A
Project B
Which project should be adopted?
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