Question Content Area

Project A requires an original investment of $62,000. The project will yield cash flows of $17,400 per year for 4 years. Project B has a computed net present value of $3,770 over a 4-year life. Project A could be sold at the end of 4 years for $19,500.

Following is a table for the present value of $1 at compound interest:

Year	6%	10%	12%
1	0.943	0.909	0.893
2	0.890	0.826	0.797
3	0.840	0.751	0.712
4	0.792	0.683	0.636
5	0.747	0.621	0.567

Following is a table for the present value of an annuity of $1 at compound interest:

Year	6%	10%	12%
1	0.943	0.909	0.893
2	1.833	1.736	1.690
3	2.673	2.487	2.402
4	3.465	3.170	3.037
5	4.212	3.791	3.605

Use the tables above.

a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. fill in the blank 1 of 1$

b. Which project provides the greatest net present value?

Project AProject B