Question
A company has to choose between two different investments. Investment A : This investment requires an immediate outlay of $70,000 and another investment of $30,000
A company has to choose between two different investments. Investment A: This investment requires an immediate outlay of $70,000 and another investment of $30,000 in year 3. The investment will return annual profits of $40,000 from year 2 to year 7. At the end of year 7, the investment has a residual value of $10,000. Investment B: This investment requires an immediate outlay of $35,000 and additional investments of $15,000 per year from year 1 to year 3. The investment will return annual profits of $28,000 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%.
a. Calculate the NPV for investment A.
Round to the nearest cent
b. Calculate the NPV for investment B.
Round to the nearest cent
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Taxation Of Individuals And Business Entities 2015
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
6th Edition
9780077862367
