Consider projects A and B with the following cash flows: What is the NPV of each
ID: 2759870 • Letter: C
Question
Consider projects A and B with the following cash flows: What is the NPV of each project if the discount rate is 10%? (Do not round calculations Round your answers to 2 decimal places.) Which project has the higher NPV? Project A Project B What is the profitabilty indox of each project? (Do not round intermediate calculations, your answers to 2 decimal places.) Project A Project B Which project is most attractive to a firm that can raise unlimited amount of funds to pay investment projects? Project A Project B Which project is most attractive to a firm that is limited in the funds it can raise? Project A Project B BothExplanation / Answer
Statement showing Cash flows Project A Project B Particulars Time PVf@10% Amount PV Amount PV Cash Outflows - 1.00 (42.00) (42.00) (67.00) (67.00) PV of Cash outflows=PVCO (42.00) (67.00) Cash inflows 1.00 0.9091 26.00 23.64 36.00 32.73 Cash inflows 2.00 0.8264 26.00 21.49 36.00 29.75 Cash inflows 3.00 0.7513 26.00 19.53 36.00 27.05 PV of Cash Inflows = PVCI 64.66 89.53 a-1) NPV = PVCI - PVCO 22.66 22.53 b1) PI = PVCI/PVCO 1.54 1.34 a2) Project A has higher NPV b2) Project A has higher PI c-1) Project A c-2) Project A
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