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5.Below are the cash flows for two projects. Year Project A Project B 0 -42,000 -55,000 1 15,000 20,000 2 15,000 18,000 3 14,000 17,000
5.Below are the cash flows for two projects.
Year | Project A | Project B |
0 | -42,000 | -55,000 |
1 | 15,000 | 20,000 |
2 | 15,000 | 18,000 |
3 | 14,000 | 17,000 |
4 | 14,000 | 20,000 |
5 | 14,000 | 19,000 |
- Graph the NPV profiles for each project.
- At what rate will the two projects have the same NPV?
- Compute the profitability index for both projects. Use a 10% interest rate.
- Compute NPV using a 10% rate.
- Which project would you choose?
Please explain how you determine the NPV rates in question 1! Thanks!
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