Pedro Spier, the president of Spier Enterprises, is consideringtwo investment opportunities. Because of limited resources, he willbe able to invest in only one of them. Project A is to purchase amachine that will enable factory automation; the machine isexpected to have a useful life of four years and no salvage value.Project B supports a training program that will improve the skillsof employees operating the current equipment. Initial cashexpenditures for Project A are $106,000 and for Project B are$40,000. The annual expected cash inflows are $40,947 for Project Aand $13,169 for Project B. Both investments are expected to providecash flow benefits for the next four years. Spier Enterprisesâ costof capital is 8 percent. (PV of $1 and PVA of $1) (Use appropriatefactor(s) from the tables provided.) Required a-1. Compute the netpresent value of each project. (Round your intermediatecalculations and final answers to 2 decimal places.) a-2. Whichproject should be adopted based on the net present value approach?Project B Project A b-1. Compute the approximate internal rate ofreturn of each project. b-2. Which one should be adopted based onthe internal rate of return approach? Project B Project A
Pedro Spier, the president of Spier Enterprises, is consideringtwo investment opportunities. Because of limited resources, he willbe able to invest in only one of them. Project A is to purchase amachine that will enable factory automation; the machine isexpected to have a useful life of four years and no salvage value.Project B supports a training program that will improve the skillsof employees operating the current equipment. Initial cashexpenditures for Project A are $106,000 and for Project B are$40,000. The annual expected cash inflows are $40,947 for Project Aand $13,169 for Project B. Both investments are expected to providecash flow benefits for the next four years. Spier Enterprisesâ costof capital is 8 percent. (PV of $1 and PVA of $1) (Use appropriatefactor(s) from the tables provided.) Required a-1. Compute the netpresent value of each project. (Round your intermediatecalculations and final answers to 2 decimal places.) a-2. Whichproject should be adopted based on the net present value approach?Project B Project A b-1. Compute the approximate internal rate ofreturn of each project. b-2. Which one should be adopted based onthe internal rate of return approach? Project B Project A
