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You are on a project selection committee and you have been tasked to find the NPV of two potential projects, Project A and Project B.
- You are on a project selection committee and you have been tasked to find the NPV of two potential projects, Project A and Project B. The cash flows and discount rates are as shown below.
| Project A | ||
| Year | r | Cash Flow |
| Year 0 |
| -$8,000 |
| Year 1 | 5% | $5,000 |
| Year 2 | 5% | $5,000 |
| Project B | ||
| Year | r | Cash Flow |
| Year 0 |
| -$1,000 |
| Year 1 | 5% | $2,411.90 |
You find that the NPV of both projects is $1,297.
- a. Can you make a decision based on the NPVs? Why or why not? (2 points)
- What is the projected ROI of Project A? (Hint: NPV is considered Net Income right?!) (2 points)
- What is the projected ROI of Project B? (2 points)
- Based on ROI which project would you choose and why? (3 points)
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AS Accounting For AQA
Authors: David Cox,Michael Fardon
2nd Edition
1905777140, 978-1905777143
