I\'m having issues on the NPV. Coming up with the numbers. Maxwell Software, Inc
ID: 2728741 • Letter: I
Question
I'm having issues on the NPV. Coming up with the numbers.
Maxwell Software, Inc., has the following mutually exclusive projects.
Year
Project A
Project B
0
–$21,000
–$24,000
1
12,500
13,500
2
9,000
10,000
3
3,000
9,000
a-1.
Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Payback period
Project A
years
Project B
years
a-2.
Which, if either, of these projects should be chosen?
Project A
Project B
Both projects
Neither project
b-1.
What is the NPV for each project if the appropriate discount rate is 17 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
NPV
Project A
$
Project B
$
b-2.
Which, if either, of these projects should be chosen if the appropriate discount rate is 17 percent?
Project A
Project B
Both projects
Neither project
Maxwell Software, Inc., has the following mutually exclusive projects.
Explanation / Answer
a-1.
Payback period of Project A = 1 + (21,000 - 12,500) / 9,000
= 1.94 years
Payback period of Project B = 2 + (24,000 - 13,500 - 10,000) / 9,000
= 2.06 years
a-2. Project A
b-1.
NPV of Project A = - 21,000 + 12,500 / (1+17%) + 9,000 / (1+17%)2 + 3,000 / (1+17%)3
= - 1,868.51
NPV of Project B = - 24,000 + 13,500 / (1+17%) + 10,000 / (1+17%)2 + 9,000 / (1+17%)3
= 462.93
b-2. Project B
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