Consider projects A and B with the following cash flows: C0 C1 C2 C3 A $ 39 + $

Question

Consider projects A and B with the following cash flows:

C0 C1 C2 C3

A $ 39 + $ 23 + $ 23 + $ 23

B 64 + 33 + 33 + 33

1). What is the NPV of each project if the discount rate is 15%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project A: NPV: ????

Project B: NPV: ????

2). What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project A: Profitability Index: ???

Project B: Profitability index: ???

Explanation / Answer

Profitbility Index = Present value of cash inflows/ Present value of cash outflows

Project A = 52.51/39 i.e 1.3464

Project B = 75.35/64 i.e 1.1773

Calculation of NPV of the project Particulars Year PVF @ 15% Cash Flow project A Cash Flow project B PV project A PV project B Cash Outflow 0 1 39 64         39.00         64.00 Present value of cash outflows         39.00         64.00 Cash Inflows 1 to 3 2.2832 23 33         52.51         75.35 Present Value of cash inflows         52.51         75.35 Net Present Value         13.51         11.35

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.