Question

Your boss hands you the following information for a pair of mutually exclusive projects and asks for your recommendation. What should you do? Project Cost of Capital 13% 13% IRR 18% 28% Year 0 - $10,000 - $10,000 Cash Flows Year 1 Year 2 $7000 $4000 $2500 $7000 Year 3 $2000 $8000 The NPV of project A is $ , and the NPV of project B is $ (Round to two decimal places as needed.) . Using the NPV rule, project V should be selected.

Answer 1

M16 B C D E F G H I J K L M N O A NPV should be calculated using Cost of Capital IRR is the rate at which NPV = 0 Project A Project B Cash Flows ($) PV Factor @ 13% -10,000 7,000 0.8850 4,000 0.7831 2,000 0.6931 PV of Cash Flows -10,000.00 6,194.69 3,132.59 1,386.10 713.38 Cash Flows ($) PV Factor @ 13% -10,000 2,500 0.8850 7,000 0.7831 8,000 0.6931 PV of Cash Flows - 10,000.00 2,212.39 5,482.03 5,544.40 3,238.82 NPV = Present Value of Cash Inflows - Initial Investment $713.38 NPV = Present Value of Cash Inflows - Initial Investment $3,238.82 Using NPV rule, Project B is selected ... Sheet65 Sheet104 She ... + 1 P A 23:34 T O 4x ENG 20-11-2019 21