The following are the cash flows of two projects: If the opportunity cost of cap

Question

The following are the cash flows of two projects:

If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Year Project A Project B 0 $400        $400        1 230        300        2 230        300        3 230        300        4 230       

If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project NPV          A $ B $

Explanation / Answer

NPV (A) = -400 + (230 / (1.1)) + (230 / (1.1)^2) + (230 / (1.1)^3) + (230 / (1.1)^4) = $329.07

NPV (B) = -400 + (300 / (1.1)) + (300 / (1.1)^2) + (300 / (1.1)^3) = $346 .05

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