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P1 Net present value: Independent projects. Using a 10% cost of capital, calculate the net present value for each of the independent projects shown in
P1 Net present value: Independent projects. Using a 10% cost of capital, calculate the net present value for each of the independent projects shown in the following table, and indicate whether each is acceptable. | |||||||||
Cash flows (CFt) in thousands | |||||||||
Year | A | B | C | D | E | ||||
0 | -$250 | -$375 | -$550 | -$750 | -$1,150 | ||||
1 | 50 | 45 | 350 | 200 | 80 | ||||
2 | 90 | 55 | 210 | 235 | 135 | ||||
3 | 140 | 65 | 165 | 250 | 190 | ||||
4 | 80 | 55 | 55 | 265 | 255 | ||||
5 | 45 | 45 | 100 | 315 | |||||
6 | 35 | 10 | 50 | 380 | |||||
7 | 25 | 275 | |||||||
8 | 15 | 100 | |||||||
9 | 5 | 45 | |||||||
10 | 25 | ||||||||
Answer - fill in the blue boxes below. | |||||||||
Project A | |||||||||
Discount rate | 10% | ||||||||
CF0 | -$250 | ||||||||
CF1 | $50 | ||||||||
CF2 | $90 | ||||||||
CF3 | $140 | ||||||||
CF4 | $80 | ||||||||
NPV of project A | |||||||||
The project will be | |||||||||
Project B | |||||||||
Discount rate | 10% | ||||||||
CF0 | -$375 | ||||||||
CF1 | $45 | ||||||||
CF2 | $55 | ||||||||
CF3 | $65 | ||||||||
CF4 | $55 | ||||||||
CF5 | $45 | ||||||||
CF6 | $35 | ||||||||
CF7 | $25 | ||||||||
CF8 | $15 | ||||||||
CF9 | $5 | ||||||||
NPV of project B | |||||||||
The project will be | |||||||||
Project C | |||||||||
Discount rate | 10% | ||||||||
CF0 | -$550 | ||||||||
CF1 | $350 | ||||||||
CF2 | $210 | ||||||||
CF3 | $165 | ||||||||
CF4 | $55 | ||||||||
CF5 | $45 | ||||||||
CF6 | $10 | ||||||||
NPV of project C | |||||||||
The project will be | |||||||||
Project D | |||||||||
Discount rate | 10% | ||||||||
CF0 | -$750 | ||||||||
CF1 | $200 | ||||||||
CF2 | $235 | ||||||||
CF3 | $250 | ||||||||
CF4 | $265 | ||||||||
CF5 | $100 | ||||||||
CF6 | $50 | ||||||||
NPV of project D | |||||||||
The project will be | |||||||||
Project E | |||||||||
Discount rate | 10% | ||||||||
CF0 | -$1,150 | ||||||||
CF1 | $80 | ||||||||
CF2 | $135 | ||||||||
CF3 | $190 | ||||||||
CF4 | $255 | ||||||||
CF5 | $315 | ||||||||
CF6 | $380 | ||||||||
CF7 | $275 | ||||||||
CF8 | $100 | ||||||||
CF9 | $45 | ||||||||
CF10 | $25 | ||||||||
NPV of project E | |||||||||
The project will be | |||||||||
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