QUESTION 2

Monson Company is considering three investment opportunities with cash flows as described below: (Ignore income taxes in this problem.)

Project A: Cash investment now	$15,000
Cash inflow at the end of 5 years	$21,000
Cash inflow at the end of 8 years	$21,000
Project B: Cash investment now	$11,000
Cash outflow for 5 years	$3,000
Addition cash inflow at the end of 5 years	$21,000

MUST SHOW ALL CALCULATIONS a. Calculate the net present value for project A. Monson Company uses a 12% discount rate.

b. Calculate the net present value for project B. Monson Company uses a 12% discount rate.

c. Which project should the company accept and why?