Buford Manufacturing Company is considering three new projects, each requiring a

Question

Buford Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,600. Each project will last for 3 years and produce the following cash inflows.

Year AA BB CC 1 $ 6,710 $ 9,700 $15,000 2 9,120 9,700 10,500 3 14,900 9,700 9,650 Total $30,730 29,100 $35,150
The equipment Buford Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,600. Each project will last for 3 years and produce the following cash inflows.

Year AA BB CC 1 $ 6,710 $ 9,700 $15,000 2 9,120 9,700 10,500 3 14,900 9,700 9,650 Total $30,730 29,100 $35,150
The equipment Buford Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,600. Each project will last for 3 years and produce the following cash inflows.

Year AA BB CC 1 $ 6,710 $ 9,700 $15,000 2 9,120 9,700 10,500 3 14,900 9,700 9,650 Total $30,730 29,100 $35,150
The equipment Year AA BB CC Buford Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,600. Each project will last for 3 years and produce the following cash inflows.

Year AA BB CC 1 $ 6,710 $ 9,700 $15,000 2 9,120 9,700 10,500 3 14,900 9,700 9,650 Total $30,730 29,100 $35,150
The equipment Buford Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,600. Each project will last for 3 years and produce the following cash inflows.

Explanation / Answer

B)NPV

NPV of Project AA = -21600 + (6710/1.12) + (9120/1.12^2) + (14900/1.12^3) = $2267 Middle

NPVof Project BB =-21600 + (9700/1.12) + (9700/1.12^2) + (9700/1.12^3) = $1,698 Least Desirable

NPV of Project CC = -21600 + (15000/1.12) + (10500/1.12^2) + (9650/1.12^3) = $7032 Most desirable

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