Question
1.) Strausberg Inc. is considering investing in a project that would require an initial investment of $270,000. The life of the project would be 6
1.) Strausberg Inc. is considering investing in a project that would require an initial investment of $270,000. The life of the project would be 6 years. The annual net cash inflows from the project would be $81,000. The salvage value of the assets at the end of the project would be $27,000. The company uses a discount rate of 10%.
What is the undiscounted cashflow in year 6?
2.) Two investment opportunities have initial cash outlays of $25,000. Expected cash inflows for the investment opportunities are as follows:
Opportunity A Opportunity B
Year 1 $5,000 $15,000
Year 2 $10,000 $10,000
Year 3 $15,000 $5,000
Given reasonable assumptions about present value calculations, which of the two investment opportunities will have the highest net present value? (hint you choose the discount rate)
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