Rodriguez Company has money available for investment and is considering two projects each costing $17,500. Each project

Question:

Rodriguez Company has money available for investment and is considering two projects each costing $17,500. Each project has a useful life of 3 years and no salvage value. The investment cash flows follow:

Instructions
a. Using the net present value method (hint: use discount factors), compute the net present value for each project if 8% is an acceptable earnings rate.
b. Which project should be selected? Explain youranswer.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...