Use the NPV method to determine whether Preston Products should invest in the following projects: Project A: Cost $295,000 and offers seven annual net cash inflows of $53,000. Preston Products requires an annual return of 12% on investments of this nature. Project B: Costs $400,000 and offers 9 annual net cash inflows of $76,000. Preston Products demands and annual return of 10% on investments of this nature.

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.

Select the formula, then enter the amounts to calculate the profitability index of each project. Project A Project B = = = Profitability Index \begin{tabular}{clrl} ProjectA:Years & NetCashInflow & AnnuityPVFactor(i=12%,n=7) & PresentValue \\ \hline 17 & Present value of annuity & & \\ 0 & Investment & & \\ & Net present value of Project A & & \\ \hline \end{tabular} Calculate the NPV of Project B. Requirement 2 . What is the maximum acceptable price to pay for each project? Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Average amount invested Average annual operating income Initial investment Present value of net cash inflows each rofitability Index 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Average amount invested Average annual operating income Initial investment Present value of net cash inflows