Using a 14% cost of capital, calculate the net present value for each of the ind

Question

Using a 14% cost of capital, calculate the net present value for each of the independent projects shown in the following table, and indicate whether each is acceptable. Initial investment: Pr. A -20,000, Pr. B -600,000, Pr. C -150,000, Pr. D -760,000, Pr. E -100,000 Cash inflows: Project A Years 1-10 3,000 each yr. Project B 120,000, 145,000, 170,000, 190,000, 220,000, 240,000 Project C 18,000, 17,000 ,16,000 , 15,000, 14,000, 13,000, 12,000, 11,000, 10,000. Project D 185,000 years 1-8 Project E 0, 0, 0, 25,000, 36,000, 0, 60,000, 72,000, 84,000. Please show step by step so that I can compare the work. Thanks

Explanation / Answer

NPV of project A= -20000+(3000/1.14)+(3000/1.14^2)+(3000/1.14^3)+(3000/1.14^4)+(3000/1.14^5)+(3000/1.14^6)+(3000/1.14^7)+(3000/1.14^8)+(3000/1.14^9)+(3000/1.14^10)= $-4351.65

Since NPV is negative, the project is NOT acceptable

NPV of project B= -600,000+(120,000/1.14)+(145,000/1.14^2)+(170,000/1.14^3)+(190,000/1.14^4)+(220,000/1.14^5)+(240,000//1.14^6)= $67678.2

Since NPV is positive, the project is acceptable

NPV of project C= -150,000+(18,000/1.14)+(17,000/1.14^2)+(16,000/1.14^3)+(15,000/1.14^4)+(14,000/1.14^5)+(13,000/1.14^6)+(12,0001.14^7)+(11,000/1.14^8)+(10,000/1.14^9)= -$76528.2

Since NPV is negative, the project is NOT acceptable

NPV of project D= -760,000+(185,000/1.14)+(185,000?/1.14^2)+(185,000?/1.14^3)+(185,000?/1.14^4)+(185,000?/1.14^5)+(185,000?/1.14^6)+(185,000?/1.14^7)+(185,000?/1.14^8)= $98189.82

Since NPV is positive, the project is acceptable

NPV of project E= -100,000+(25,000/1.14^4)+(36,000/1.14^5)+0+(60,000/1.14^7)+(72,000/1.14^8)+(84,000/1.14^9)= $8548.4

Since NPV is positive, the project is acceptable

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