The following projects is under consideration by the management team at your com
ID: 2671882 • Letter: T
Question
The following projects is under consideration by the management team at your company, Acme Widgets Incorporated. As Chief Financial Officer, you must decide which project to recommend to the board of directors for approval. Using NPV methodology, rank the projects from most to least desirable, and inform the board if there are any projects that should be avoided, and if so, why?
Project 1: Requires an initial cash expenditure of $50,000, has a 9.5% cost of capital, and will return 6 years of income flow in the amount of $10,000 each year.
Explanation / Answer
project1:Requires an initial cash expenditure of $50,000, has a 9.5% cost of capital, and will return 6 years of income flow in the amount of $10,000 each year. npv=-c0+rt/(1+i)^t here c0= $50,000,i=9.5% ,t=6yrs r= $10,000 npv=-$50,000+$10,000/(1+.95)^1+$10,000/(1+.95)^2+$10,000/(1+.95)^3+ $10,000/(1+.95)^4+$10,000/(1+.95)^5+$10,000/(1+.95)^6 now we will observe out of all the projects which has the maximum positive value of npv that will b selected .. u have to do all the calculations for npv as done above
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