Silver Lining Inc. is considering two projects. Project A requires an investment
ID: 2758703 • Letter: S
Question
Silver Lining Inc. is considering two projects. Project A requires an investment of $41,000. Estimated annual receipts for 20 years are $25,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $80,000, has annual receipts for 20 years of $31,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 10.0 percent/year. Projects are NOT mutually exclusive. What is the present worth of each project? Which project(s) should be chosen? Why?
Important: Please complete in Excel AND upload to http://tempsend.com/ (Select 1 Week) or any upload site you like.
Hightlight answer. I will make sure to give instant postive feedback
Explanation / Answer
Both the project can be choosen as noth have positive NPV. and the NPV of project A higher.
Project A Year Initial investment Revenue Cost Cash outflow/inflow PV @ 10% 0 - 41,000 - 41,000 - 41,000 1 25,000 12,500 12,500 11,364 2 25,000 12,500 12,500 10,331 3 25,000 12,500 12,500 9,391 4 25,000 12,500 12,500 8,538 5 25,000 12,500 12,500 7,762 6 25,000 12,500 12,500 7,056 7 25,000 12,500 12,500 6,414 8 25,000 12,500 12,500 5,831 9 25,000 12,500 12,500 5,301 10 25,000 12,500 12,500 4,819 11 25,000 12,500 12,500 4,381 12 25,000 12,500 12,500 3,983 13 25,000 12,500 12,500 3,621 14 25,000 12,500 12,500 3,292 15 25,000 12,500 12,500 2,992 16 25,000 12,500 12,500 2,720 17 25,000 12,500 12,500 2,473 18 25,000 12,500 12,500 2,248 19 25,000 12,500 12,500 2,044 20 25,000 12,500 12,500 1,858 NPV 65,420 Project B Year Initial investment Revenue Cost Cash outflow/inflow PV @ 10% 0 - 80,000 - 80,000 - 80,000 1 31,000 18,000 13,000 11,818 2 31,000 18,000 13,000 10,744 3 31,000 18,000 13,000 9,767 4 31,000 18,000 13,000 8,879 5 31,000 18,000 13,000 8,072 6 31,000 18,000 13,000 7,338 7 31,000 18,000 13,000 6,671 8 31,000 18,000 13,000 6,065 9 31,000 18,000 13,000 5,513 10 31,000 18,000 13,000 5,012 11 31,000 18,000 13,000 4,556 12 31,000 18,000 13,000 4,142 13 31,000 18,000 13,000 3,766 14 31,000 18,000 13,000 3,423 15 31,000 18,000 13,000 3,112 16 31,000 18,000 13,000 2,829 17 31,000 18,000 13,000 2,572 18 31,000 18,000 13,000 2,338 19 31,000 18,000 13,000 2,126 20 31,000 18,000 13,000 1,932 NPV 30,676Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.