• Use the XYZ cash flow projections below to complete calculations for this project.

• XYZ Long-Term Cash Flow Projection for Project A

Cash Investment at start of project (initial cash outflow) = ($1,000,000)

Year 1: Cash inflow = $350,000

Year 2: Cash inflow = $350,000

Year 3: Cash inflow = $350,000

Year 4: Cash inflow = $350,000

Year 5: Cash inflow = $350,000

• XYZ Long-Term Cash Flow Projection for Project B

Cash Investment at start of project (initial cash outflow) = ($1,000,000)

Year 1: Cash inflow = $450,000

Year 2: Cash inflow = $500,000

Year 3: Cash inflow = $500,000

Year 4: Cash inflow = $150,000

Year 5: Cash inflow = $150,000

The formula to calculate the present value of each year's future cash inflow is:

Present Value = Future Value / (1 + interest rate)^{Number of Years}

Follow these steps to determine each project's net present value (NPV):

1. Calculate the present value of the cash inflows for each of the 5 years.

2. Sum all 5 years of calculated present values.

3. Subtract the cash investment at the start of the project (initial cash outflow).

4. The result will be the projects's net present value.

Create

Use XYZ Entertainment Company's 5-year Cash Flow projections for Project A and Project B to complete the Project 3 Answer Include the following information:

1. The net present value (NPV) of Project A

• The present value of cash inflow for year 1
• The present value of cash inflow for year 2
• The present value of cash inflow for year 3
• The present value of cash inflow for year 4
• The present value of cash inflow for year 5

2.The net present value (NPV) of Project B

• The present value of cash inflow for year 1
• The present value of cash inflow for year 2
• The present value of cash inflow for year 3
• The present value of cash inflow for year 4
• The present value of cash inflow for year 5

3.Which project has the highest net present value (Project A or Project B)?

Project 3 Answer : Net Present Value

1. Calculate the net present value for Project A.

The formula to calculate the present value of each year's future cash inflow is:

Present Value = Future Value / (1 + rate)^{number of years}

• The present value of cash inflow for year 1:

• The present value of cash inflow for year 2:

• The present value of cash inflow for year 3:

• The present value of cash inflow for year 4:

• The present value of cash inflow for year 5:

• The investment (cash outflow) at start of project:

• Project A's net present value:

1. Calculate the net present value for Project B.

The formula to calculate the present value of each year's future cash inflow is:

Present Value = Future Value / (1 + rate)^{number of years}

• The present value of cash inflow for year 1:

• The present value of cash inflow for year 2:

• The present value of cash inflow for year 3:

• The present value of cash inflow for year 4:

• The present value of cash inflow for year 5:

• The investment (cash outflow) at start of project:

• Project B's net present value: