Harry Company is considering two different, mutually exclusive capital expenditu

Question

Harry Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $395,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,000. Project B will cost $270,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,000. A discount rate of 9% is appropriate for both projects. Compute the net present value of each project. (Round answers to 0 decimal places, e.g. 125.) Project A $ Project B $ Which project should be accepted?

Explanation / Answer

Project A NPV would be $54,236; Project B NPV would be $50,833;

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