The following are the cash flows of two projects: Year Project A Project B 0 $22

Question

The following are the cash flows of two projects: Year Project A Project B 0 $220        $220        1 100        120        2 100        120        3 100        120        4 100        a. Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project NPV         A $    B    b. Suppose that you can choose only one of these projects. Which would you choose? Project A Project B Neither
The following are the cash flows of two projects:

Explanation / Answer

a.

Project NPV

Project A $96.99

Project B $78.42

b. Since Project A has higher NPV it should be accepted.

Year Project A Project B PV Factor @ 10% PV of Project A PV of Project B 0 -220 -220 1 -220 -220 1 100 120 0.9091 90.91 109.09 2 100 120 0.8264 82.64 99.17 3 100 120 0.7513 75.13 90.16 4 100 0.6830 68.30 0.00 Net Present Value 96.99 78.42

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