XYZ Ltd is a company that is considering two alternative investments: Project A that would cost 40,000 and Project B that would cost 39,000.The chosen project would commence on 1 January next year ('Year 1'), when the initial investment would be made.As a result of the investment,SettloxLtd can expect to increase its cash flows over the life of the project by the following predicted amounts:

Year	Project C ()	Project D ()
1	10,000	16,000
2	12,000	4,000
3	21,000	17,000
4	23,000	13,000
5	18,000	25,000

The discount rate to be applied to each project is 8%, and the relevant discount factors are shown here:

Period	Factor
1	0.926
2	0.857
3	0.794
4	0.735
5	0.681

Assuming that all cash flows other than the initial cost occur at the end of each year, calculate the net present value of each investment. Which project should be chosen?

First, think about how net present value (NPV) is defined: (Complete the necessary drop downs.)

NPV is a method of investment appraisal based on the ...........................of all relevant ..........................

Next, show the discounted cash flows in this table:

(Fill in the relevant cells with their corresponding figures. Round amounts to the nearest .)

	Project C ()			Project D ()
Year	Cash inflow	Discount factor	Present values	Cash inflow	Discount factor	Present values
1	10,000	0.926		16,000	0.926
2	12,000	0.857		4,000	0.857
3	21,000	0.794		17,000	0.794
4	23,000	0.735		13,000	0.735
5	18,000	0.681		25,000	0.681
Total present values				Total present values
Net cost investment				Net cost investment
Net present value				Net present value

The project to be chosen on the basis of its net present value would be Project ......... (Answer 'A' or 'B' here, or 'N' for neither)

Enter any number in the edit fields, then continue to the next question.