Question

5.29: Consider the independent investment projects in Table P5.29. Compute the project worth of each project at the end of six years with variable MARRs as follows: 10% for n=0 to n = 3 and 15% for n = 4 to n = 6. Table P5.29 Project Cash Flows А -$800 -$500 $200 150 150 -40 0 - N ~ 150 150 -60 350 150 -140 -200 100 + Do 500 100 400 Note: Show all calculations to receive credit

*Please use formula equation to solve this problem! Not Excel table!!!!

Answer 1

PROJECT A

YEAR	CASH FLOW	PVIF@10%/15%	PRESENT VALUE
0	-800	0	-800
1	150	0.909	136.36
2	150	0.826	123.97
3	350	0.751	262.96
4	-200	0.572	-114.35
5	500	0.497	248.59
6	400	0.432	172.93
		NPV	30.46

NPV = Present Value of Cash Outflow - Present value Of Cash Inflow

present value formula and calculation = Future Value/(1+R)ⁿ

NPV = -800 - [150/(1.10)¹+150/(1.1)²+350(1.1)³-200(1.15)⁴+500(1.15)⁵+400(1.15)⁶]

^{NPV = 30.46}

PROJECT B

YEAR	CASH FLOW	PVIF@10%/15%	PRESENT VALUE
0	-500	0	-500
1	150	0.909	136.36
2	150	0.826	123.97
3	150	0.751	112.70
4	100	0.572	57.175
5	100	0.497	49.72
		NPV	-20.075

NPV = Present Value of Cash Outflow - Present value Of Cash Inflow

present value formula and calculation = Future Value/(1+R)ⁿ

NPV = -500 - [150/(1.10)¹+150/(1.1)²+150(1.1)³+100(1.15)⁴+100(1.15)⁵]

^{NPV = -20.075}

PROJECT C

YEAR	CASH FLOW	PVIF@10%	PRESENT VALUE
0	200	0	200
1	-40	0.909	-36.36
2	-60	0.826	-49.59
3	-140	0.751	-105.18
		NPV	8.87

NPV = Present Value of Cash Outflow - Present value Of Cash Inflow

present value formula and calculation = Future Value/(1+R)ⁿ

NPV = 200- [40/(1.10)¹+60/(1.1)²+140(1.1)³]

^{NPV = 8.87}