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The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 5 years
The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 5 years and Project B has a 3 year life. Calculate the NPV of each project and calculate which should be adopted using the replacement chain approach. Assume that the cost of capital is 10%.
| Project CFs | Project CFs |
Time | A | B |
0 | -100 | -150 |
1 | 20 | 75 |
2 | 25 | 60 |
3 | 30 | 50 |
4 | 30 |
|
5 | 40 |
|
NPV | 6.7097 | 5.3343 |
answer is -2.85 How to get this number?
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