Dwight Donovan, the president of Walton 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 current equipment. Initial cash expenditures for Project A are $103,000 and for Project B are $48,000. The annual expected cash inflows are $26,481 for Project A and $13,982 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Walton Enterprises’ desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
*****What is the net present value for project A & B?
*****What is the approximate internal rate of return for Project A & B?
USING THE SCENARIO ABOVE
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