Question
Here are the cash-flow forecasts for two mutually exclusive projects: Cash Flows (dollars) Year Project A Project B 0 120 120 1 50
Here are the cash-flow forecasts for two mutually exclusive projects:
| Cash Flows (dollars) | |||||||
| Year | Project A | Project B | |||||
| 0 | − | 120 | − | 120 | |||
| 1 | 50 | 69 | |||||
| 2 | 70 | 69 | |||||
| 3 | 90 | 69 | |||||
a-1. What is the NPV of each project if the opportunity cost of capital is 2%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a-2. Which project would you choose?
b-1. What is the NPV of each project if the opportunity cost of capital is 14%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2. Which would you choose?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the NPV Net Present Value of each project we need to discount the cash flows to their p...
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
