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Zellar\'s, Inc. Is considering two mutually exclusive projects, A and B. Project

ID: 2744396 • Letter: Z

Question

Zellar's, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.'s required rate of return for these projects is 10%. The net present value for project A is:
A $5826 B.$6347 C.$9458 D.$18000 Zellar's, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.'s required rate of return for these projects is 10%. The net present value for project A is:
A $5826 B.$6347 C.$9458 D.$18000 Zellar's, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.'s required rate of return for these projects is 10%. The net present value for project A is:
A $5826 B.$6347 C.$9458 D.$18000

Explanation / Answer

Year Cash flow PVF@10% Present value 0 $                                                   (75,000) 1.000 $                                          (75,000) 1 $                                                     48,000 0.909 $                                            43,636 2 $                                                     45,000 0.826 $                                            37,190 Net present value $                                              5,826