Hyung Corporation is considering investing in two different projects. It could i

Question

Hyung Corporation is considering investing in two different projects. It could invest in both, neither, or just one of the projects. The forecasts for the projects are as follows. Compute the net present value of the two projects. (Round answers to 0 decimal places, e.g. 25,000. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) What capital budgeting decision should Hyung make? Project A could be modified. By spending $20,500 more initially, the net annual cash flows could be increased by $18,300 per year. Would this change Hyung's decision?

Explanation / Answer

a)

B)project B as NPV is positive .

c) Cash flow = 50900 + 18300 = 69200

Initial investment = 209300 + 20500 = 229800

Present value of cash flow = (3.88965 * 69200)

                                     = 269163.78

NPV = 269163.78 - 209300 = $ 59863.78

no as NPV is still lower than project B.

Project A B Present value of cash flow (PVAF@9%,5 *Annual cash flow) (PVAF@9%,10 *Annual cash flow) (3.88965 * 50900) (6.41766*65400) 197983.25 419714.81 Less:Initial investment - 209300 - 302800 NPV - 11316.75 116914.81

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.