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1. Use the net present value, repeated lives method to choose between the following two projects: Project A: Costs $750 in Year 0. Provides income
1. Use the net present value, repeated lives method to choose between the following two projects: Project A: Costs $750 in Year 0. Provides income of $250 a year from Year 1 to Year 20. Project B: Costs $500 in Year 0. Provides income of $200 per year from Year 1 to Year 10, and salvage income of $300 in Year 10. Background information: o It is currently Year 0. o All cash flows (costs and income) above are nominal. - All cash flows take place on Jan 1St (the start) of each year. 0 The real MARR is 2% per year. 0 Inflation is 2% a year until the start of Year 10, and 4% a year after that. a. (6 marks) Calculate the appropriate Net Present Value of Project A for use in a repeated lives, net present worth comparison with Project B. Show your work. Net Present Value of Project A: _$2,507.29
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