Question
8. A firm is considering four possible independent project options. Project A has an initial investment cost (in year 0) of $9,000 and yields net
8. A firm is considering four possible independent project options. Project A has an initial investment cost (in year 0) of $9,000 and yields net benefits of $4,280 each year for 3 years (year 1 to year 3). Project B has an initial investment cost (year 0) of $10,000 and yields net benefits of $4,560 each year for 2 years (year 1 to year 2). Project C has an initial investment cost (year 0) of $8,000 and yields net benefits of $3,500 each year for four years (year 1 to year 4). Project D has an initial investment cost (year 0) of $7,500 and yields net benefit of $5,500 each year over 3 years (year 1 to year 3). Assuming a discount rate of 8%, estimate the following: e) Net Present Value (NPV) of the four projects f) Discounted Benefit-Cost Ratio for the four projects g) Net discounted Benefit-Cost Ratio for the four projects h) Rank projects using the NPV criteria i) Rank projects using the Benefit-cost ratio
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