Question
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 offersseven annual net cash inflows of$57,000. Rouse Products requires an annual return of14% on investments of this nature. | |
Project B: Costs$380,000 and offers10 annual net cash inflows of$73,000. Rouse Products demands an annual return of12% on investments of this nature. |
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(Click the icon to view Present Value of Ordinary Annuity of $1 table.)Read the requirements
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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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