Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1: COMPARING TWO PROJECTS UNSING NET PRESENT VALUE (NPV) Year 0 Year 1 Year 2 Year 3 Years Year 6 Interest rate 15% Total

image text in transcribed
Question 1: COMPARING TWO PROJECTS UNSING NET PRESENT VALUE (NPV) Year 0 Year 1 Year 2 Year 3 Years Year 6 Interest rate 15% Total Project A Required Outflow Inflow Net Inflow NPV (S700.000) $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 (S700,000) 1,125,000 $425,000 $54,234.90 15% (S400,000) Project B Required Outflow inflow Net Inflow NPV $110,000 S110,000 $110.000 S110,000 S110,000 $110,000 $110,000 $110,000 S110,000 $110,000 (S400.000) S550,000 S150.000 (S31.262.94) Questions: Based on the information above, identify which project (Project A or B) should be accepted? Explain why. By changing the figures in the excel template (above), assume the interest rate for Project A fell to 13%, and Cash outflow (The initial investment) was $950,000, Cash Inflows was $350,000 per annum for the 6 years, and Net inflows was also $250,000. For Project B, assume interest rate also fell to 13% but Cash outflow, Inflow and Net Inflows remain the same. What is the new NPV for each of the project? Would you receommend that any of these project be accepted by the investor? Why/Why not

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Effective Writing A For Accountants

Authors: Claire B. May, Gordon S. May

9th Edition

0132567245, 9780132567244

More Books

Students also viewed these Accounting questions