Create an NPV Profile for the two projects: Include the NPV of both projects, a
ID: 2712115 • Letter: C
Question
Create an NPV Profile for the two projects:
Include the NPV of both projects, a graph illustrating the results of your NPV profile (both projects should be on the same graph) and a response to the following questions.
At what interest rate(s) does Project A become undesirable; at what interest rate does Project B become undesirable and why?
When would you prefer Project A over Project B; why?
When would you prefer Project B over Project A; why?
At what interest rate would you be indifferent between Project A and Project B?
If the required rate of return were 20%, which project would you choose and why?
Use the following as a guide for creating your profile:
Rates
0%
2.50%
5%
7.50%
10%
12.50%
15%
17.50%
20%
22.50%
25%
27.50%
30%
Year
Cash Flow ($)
Project A
Project B
0
-5000
-5000
1
2085
0
2
2085
0
3
2085
0
4
2085
9677
NPV Project A @ 0%:
$
NPV Project B @ 0%:
$
NPV
Discount Rate
NPV A
NPV B
0.00%
2.50%
5.00%
7.50%
10.00%
12.50%
15.00%
17.50%
20.00%
22.50%
25.00%
27.50%
30.00%
Rates
0%
2.50%
5%
7.50%
10%
12.50%
15%
17.50%
20%
22.50%
25%
27.50%
30%
Year
Cash Flow ($)
Project A
Project B
0
-5000
-5000
1
2085
0
2
2085
0
3
2085
0
4
2085
9677
NPV Project A @ 0%:
$
NPV Project B @ 0%:
$
NPV
Discount Rate
NPV A
NPV B
0.00%
2.50%
5.00%
7.50%
10.00%
12.50%
15.00%
17.50%
20.00%
22.50%
25.00%
27.50%
30.00%
Explanation / Answer
Projec A will be prefferd why because the npv of Project a has more positives then Project b
year Cash flow project A Cash flow project B Rate@0% Pv @0% project A pv@0% projectB 0 -5000 -5000 0 0 0 1 2085 0 0 0 0 2 2085 0 0 0 0 3 2085 0 0 0 0 4 2085 9677 0 0 0 NPV 0 0Related Questions
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