XYZ Corp. is considering two mutually exclusive investments whose expected net c
ID: 2655183 • Letter: X
Question
XYZ Corp. is considering two mutually exclusive investments whose expected net cash flows are as follows:
EXPECTED NET CASH FLOWS
Year
Project A
Project B
0
-$290
-$400
1
-387
134
2
-193
134
3
-100
134
4
600
134
5
600
134
6
850
134
7
-180
134
A) Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Round your answers to the nearest cent.
B) Calculate the two projects' NPVs, if the cost of capital was 17%. Round your answers to the nearest cent.
EXPECTED NET CASH FLOWS
Year
Project A
Project B
0
-$290
-$400
1
-387
134
2
-193
134
3
-100
134
4
600
134
5
600
134
6
850
134
7
-180
134
Explanation / Answer
INPUT DATA: Expected Cash Flows Year Proj. A Proj. B 0 -290 -400 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Cost of capital 0.14 14% Proj. A Proj. B NPV 136.7051 174.6328 17% Proj. A Proj. B NPV 41.04895 125.5989
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