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A company has to choose between two different investments. Investment A: This investment requires an immediate outlay of $80,000 and another investment of $50,000
A company has to choose between two different investments. Investment A: This investment requires an immediate outlay of $80,000 and another investment of $50,000 in year 3. The investment will return annual profits of $45,000 from year 2 to year 7. At the end of year 7, the investment has a residual value of $5,000. Investment B: This investment requires an immediate outlay of $20,000 and additional investments of $10,000 per year from year 1 to year 3. The investment will return annual profits of $29,000 from year 4 to year 7. At the end of year 7, the investment has a residual value of $20,000. The cost of capital is 8.5%. a. Calculate the NPV for investment A. $0.00 Round to the nearest cent b. Calculate the NPV for investment B. 50.00 Round to the nearest cent
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