Question

K wan Inc. has identified the following three mutually exclusive projects. Project Stan and Project losind carn any cash flows after Year 4. while Project Turkidla will keep generating $5,500 vry year forever. Assume Mar ar forever. Assume that the required return is 11 percent. Year Project Stan $ (43,500 $ 21,400 $ 18,500 $ 13,800 S 7,600 Project Posylnaya $ (43,500) 6,400 14,700 $ 22,800 $ S Project Turkiela $ (43,500) 5,500 $ 5,500 5,500 5,500 $ 5,500 5,500 S 25,200s 8: . Between Project Stan and Project Posylnaya, which project should the company choose, according to the NPV rule? Show your work and explain to receive any credit. Round your answer to three

Answer 1

Year Project Stan Project Posylnaya PVIF@11% I C 0 $ (43,500) $ (43,500) 1.0000 $ 1 $ 21,400 $ 6,400 0.9009 $ 2 $ 18,500 $ 14,700 0.8116 $ 3 $ 13,800 $ 22,800 0.7312 $ 4 $ 7,600 $ 25,200 0.6587 $ Present value Project Stan Project Posylnaya AxC BxC (43,500.00) $ (43,500.00) 19,279.28 $ 5,765.77 15,015.02 $ 11,930.85 10,090.44 $ 16,671.16 5,006.36 $ 16,600.02 Net present value $ 5,891.09 $7,467.80 Hence, Project Posylnaya should be selected.

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