Question
Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $ 56,000 $ 71,000 1 36,000 35,000 2 31,000
| Consider the following cash flows on two mutually exclusive projects: |
| Year | Project A | Project B | ||
| 0 | $ | 56,000 | $ | 71,000 |
| 1 | 36,000 | 35,000 | ||
| 2 | 31,000 | 44,000 | ||
| 3 | 26,000 | 47,000 |
| The cash flows of project A are expressed in real terms, whereas those of project B are expressed in nominal terms. The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. |
| Calculate the NPV for each project.(Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
| NPV | |
| Project A | $ |
| Project B | $ |
| Which project should you choose? | ||
|
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Financial Management for Public, Health and Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
5th edition
1506326846, 9781506326863, 1506326862, 978-1506326849
