Question

Use the NPV method to determine whether Olde West Products should invest in the following projects:
• Project A costs $ 290,000 and offers seven annual net cash inflows of $ 63,000. Olde West Products requires an annual return of 14% on projects like A.
• Project B costs $ 395,000 and offers ten annual net cash inflows of $ 71,000. Olde West Products demands an annual return of 10% on investments of this nature.

Requirement
What is the NPV of each project? What is the maximum acceptable price to pay for each project?



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  • CreatedAugust 27, 2014
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