\"Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of c

Question

"Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 12 percent to evaluate average-risk projects, and it adds or subtracts 3 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 373 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 87 . Project B, of less than average risk, will produce cash flows of $ 316 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project."

Explanation / Answer

A with a NPV of $7,177.

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