Question

The following are the cash flows of two projects: Year Project $(370) 200 Proiect B $ (370) 270 209 270 280 270 200 a:Calculate the NPV for both projects if the opportunity cost of capital is 15% (Do not round intermediate calculations. Round your answers to 2 decimal places.) NPV Project A B b. Suppose that you can choose only one of these projects. Which would you choose? Project A Neither Project B

Answer 1

DS fx =SUM(D3:07) Present value 1.0000 $ (370.00) 0.8696 $ 173.91 0.7561 $ 151.23 0.6575 $ 131.50 0.5718 $ 114.35 $ 201.00 1 Project A 2 year Cash flows pv@15% (370.00) 200.00 200.00 200.00 200.00 NPV 9 10 Project B year Cash flows pv@15% o $ (370.00) $ 270.00 270.00 270.00 NPV Present value 1.0000 $ (370.00) 0.8696 $ 234.78 0.7561 $ 204.16 0.6575 $ 177.53 $ 246.47 Accept Project B

D8 - fc =SUM(D3:07) B pv@15% Cash flows -370 200 1 Project A 2 year 30 4 1 52 63 74 8 200 =C3/1.15 =C4/1.15 =C5/1.15 =C6/1.15 Present value =B3*C3 =B4*04 =B5*C5 =B6*C6 =B7*C7 =SUMD3:07) NPV 9 10 Project B 11 year 120 pv@15% Cash flows -370 270 270 270 Present value =B12*C12 =B13*C13 =B14*C14 =B15*C15 =SUM(D12:015) =C12/1.15 =C13/1.15 =C14/1.15 NPV 14 2 Accept Project B