Homework Answers
NPV = PV of Cash Inflows - PV of Cash Outflows
Project A:
| Year | CF | PVF @12% | Disc CF |
| 0 | $ -10,000.00 | 1.0000 | $ -10,000.00 |
| 1 | $ 5,000.00 | 0.8929 | $ 4,464.29 |
| 2 | $ 5,000.00 | 0.7972 | $ 3,985.97 |
| 3 | $ 5,000.00 | 0.7118 | $ 3,558.90 |
| 4 | $ 5,000.00 | 0.6355 | $ 3,177.59 |
| 5 | $ 5,000.00 | 0.5674 | $ 2,837.13 |
| NPV | $ 8,023.88 | ||
Project B:
| Year | CF | PVF @15% | Disc CF |
| 0 | $ -10,000.00 | 1.0000 | $ -10,000.00 |
| 1 | $ 6,000.00 | 0.8696 | $ 5,217.39 |
| 2 | $ 6,000.00 | 0.7561 | $ 4,536.86 |
| 3 | $ 6,000.00 | 0.6575 | $ 3,945.10 |
| 4 | $ 6,000.00 | 0.5718 | $ 3,430.52 |
| 5 | $ 6,000.00 | 0.4972 | $ 2,983.06 |
| NPV | $ 10,112.93 | ||
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Net present value and Profitability Index of each Project
Following is information on two alternative investments being considered by Tiger Co. The company requires an 8% return from its investments. FV of $1, PVA of SI and FVA of SJ (use appropriate factor(s) from the tables provided.)
49, see
Initial investment
Expected net cash f lows in:
Year I
Year 2
Year 3
Project XI
$ (108, aøe)
39 , aøe
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Project X2
81,øeø
71,øeø
61,øeo
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