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se the NPV method to determine whether Rouse Products should invest in the following projects: Project A: Costs $270,000 and offers seven annual net cash

se the NPV method to determine whether

Rouse

Products should invest in the following projects:

Project

A:

Costs

$270,000

and offers

seven

annual net cash inflows of

$57,000.

Rouse

Products requires an annual return of

14%

on investments of this nature.

Project

B:

Costs

$380,000

and offers

10

annual net cash inflows of

$73,000.

Rouse

Products demands an annual return of

12%

on investments of this nature.

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Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.)

Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A.

Project A:

Net Cash

Annuity PV Factor

Present

Years

Inflow

(i=14%, n=7)

Value

1 - 7

Present value of annuity

0

Investment

Net present value of Project A

Calculate the NPV of Project B.

Project B:

Net Cash

Annuity PV Factor

Present

Years

Inflow

(i=12%, n=10)

Value

1 - 10

Present value of annuity

0

Investment

Net present value of Project B

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