Question
Background : Projects I and J require initial investments of $8,000 and $10,000, respectively. Their cash flows over three years are as follows. Calculate the
Background: Projects I and J require initial investments of $8,000 and $10,000, respectively. Their cash flows over three years are as follows. Calculate the NPVs using a discount rate of 20%.
Cash Flows:
Year | Project I | Project J |
0 | -$8,000 | -$10,000 |
1 | $2,000 | $3,000 |
2 | $4,000 | $5,000 |
3 | $6,000 | $7,000 |
Requirements:
- Calculate the NPV for each project using a discount rate of 20%.
- State your accept/reject decision for each project.
- If the projects were independent, what would be your accept/reject decision?
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Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
25th edition
978-1285069609, 1285069609, 978-1133607601
