Use the following information to complete questions 6-12. Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. Project A will have cash flows of $3 million in year 1, $4 million in year 2, $8 million in year 3, and $18 million in year 4. Project B will have cash flows of $17 million in year 1, $9 million in year 2, $4 million in year 3, and $2 million in year 4.

Question 1

Assume the projects are independent.

What is Project A's net present value, assuming the cost of capital is 6%? Blank 1

What is Project B's net present value, assuming the cost of capital is 6%? Blank 2

At this cost of capital, do you accept or reject Project A? Blank 3

At this cost of capital, do you accept or reject Project B? Blank 4

Question 2

Assume the projects are independent.

What is Project A's net present value, assuming the cost of capital is 9%? Blank 1

What is Project B's net present value, assuming the cost of capital is 9%? Blank 2

At this cost of capital, do you accept or reject Project A? Blank 3

At this cost of capital, do you accept or reject Project B? Blank 4