Question

(Risk-adjusted NPV) The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $12,000 and wil operate for 8 years Project A will produce expected cash flows of $8,000 per year for years 1 through 8, whereas project will produce expected cash flows of 9,000 per year for years through 8. Because project B is the riskler of the two projects, the management of Hokie Corporation has decided to apply a required rate of return of 16 percent to its evaluation but only a required rate of return 11 percent to project A. Determine each project's risk-adjusted net present value. What is the risk-adjusted NPV of project A? $ (Round to the nearest cent.) What is the risk-adjusted NPV of project B? $ (Round to the nearest cent.)

Answer 1

	Project A	Project B
NPV	29168.98	27092.32

Workings

Year	Project A	Project B
0	-12000	-12000
1	8000	9000
2	8000	9000
3	8000	9000
4	8000	9000
5	8000	9000
6	8000	9000
7	8000	9000
8	8000	9000
	Project A	Project B
NPV	29168.98	27092.32

AutoSave o 9.3HD Book1 - Excel Sign in - 0 X File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do Share Comments - 11 A = = 0 Calibri BIU - B 2:49 O -A A = E Insert - Delete - Format Paste L- - General 3$ -% Number . Conditional Format as Formatting Table - Cell Styles Sort & Find & Filter - Select Editing Clipboard Font Alignment Styles Cells M1 - Year f K L M Year Project A Project B Om in - 12000 - 12000 8000 9000 8000 9000 8000 9000 8000 9000 8000 9000 8000 9000 8000 9000 8000 9000 Project A Project B =NPV(11%,N3:N10)+N2 =NPV(16%,03:010)+02 NPV Sheet1 Sheet4 Sheet2 Sheets Sheet3 → Ready P - E A D + 100% 0 100 Loe x wi U ENG 6:08 AM