Question

Use the NPV method to determine whether Juda Products should invest in the following projects: Project A costs $280,000 and offers seven annual net cash inflows of $65,000. Juda Products requires an annual retun of 12% on projects like A Project B costs $385,000 and offers nine annual net cash inflows of $69.000. Juda Products demands an annual retum of 10% on investments of this nature. (Click the icon to view the present value annuity table.) (Click the icon to view the present value table.) (Click the lcon to view the future value annuity table.) (Click the icon to view the future value table.) Requirement What is the NPV of each project? What is the maximum acceptable price to pay for each project? Calculate the NPV of each project. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is $ The NPV of Project B is $ Now calculate the maximum acoeptable price to pay for each project. (Round your answers to the nearest whole dollar.) Project A is $ Project B is $

Answer 1

NPV of each product:-

=PV(rate,nper,pmt)-cost

Project A =PV(12%,7,-65000)-280000 =16644

Project B=PV(10%,9,-69000)-385000 =12373

Maximum acceptable price-

Project A =PV(12%,7,-65000) =296644

Project B =PV(10%,9,-69000) =397373