Question

Consider the following two mutually exclusive projects: 7. Cash Flow (A) -$300,000 Cash Flow (B) Year -40,000 0 20,000 1 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Mark Choice (X) If you require a return of 15 percent, which project should you choose?

Please show work and explain it would be the correct choice. Directions were not given as to which method to use to determine this as seen in other posted questions.

Answer 1

Solutons Net Poeaen Value is calculatad by Aubtraci-a prjeut inihal Investunt m Conintn Prerent vlu Hhe a at a a equal diseounted at imm cost Deenion cnteria reatn capi tat han O, Acept Hhe Projed. the NPv ts Rejeet thefrojeet the NPV fs Len than D fer Proput A Net enent Valuo NPV Computahon (D)(B) x(C) Present Valne ConinHw. C) pVF (i5%,4yan) (B) (A) year Canttlow 17,392 $0000 O.0696 $37005 S0000 S0000 $390,000 32,075 $223,002 0.S718 $311,074 TOtal Present value tasnint Len. DntHal out ly Net Peserst kalue $.300000 1107y

Computation 4 Net Preaent Vatue for Prrjet (A) (8) Cadnin m (D)(B) x(c) PVfisz,4ar cin Present Value 0.8696 $19000 316532-40 9,073.20 $12000 0.756 $835.00 $18p00 $6003.90 losoo TOta eert Velue codhtnt|m Len:nihal out Net Preaent Value N Pv) O.5718 3439.JD butey 40000 3434SD Conctuston Projecte 3434 SD Project A 1674.c0 1 NPV Mankchoice X ard Poive S'nie NPV fr Priet highu 7t rs better So8-Accept a A' tan o aund 22