Problem # 1: The table below provides the estimated end-of-year net cash flows t

Question

Problem # 1: The table below provides the estimated end-of-year net cash flows that would be received from alternative projects A and B for an investment of $200,000 ear l $90,000 $40,000 Year 2 70,000 50,000 ear 3 $60,000 $60,000 ear 4 50,000 133.000 Project A roject B (a) Find the NPV of each project if the cost of capital is 5.5% (b) In part (a), which project is better? (c) Find the NPV of each project if the cost of capital is 7.5% (d) In part (c), which project is better? NPV of Projects A and B (in that order) separated with a comma Answers correct to 2 decimals Problem #1(a) (A) Project B (B) Project A Problem #1(b): | Select ?| NPV of Projects A and B (in that order), separated with a comma Answers correct to 2 decimals Problem #1(c) (A) Project B (B) Project A Problem #1(d): Select

Explanation / Answer

(a) The computation of NPV is given below:

(b) With above data, project A is better.

(c)  The computation of NPV is given below:

(d) With above data, project A is better.

Year 1 Year 2 Year 3 Year 4 Rate Project A 90,000 70,000 60,000 50,000 5.50 % Project B 40,000 50,000 60,000 1,33,000 NPV Project A = $ 15,749.45 NPV Project B = $ 7,630.27

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