Question

Use the NPV method to determine whether Smith Products should invest in the following projects:
• Project A costs $ 260,000 and offers seven annual net cash inflows of $ 59,000. Smith Products requires an annual return of 16% on projects like A.
• Project B costs $ 390,000 and offers nine annual net cash inflows of $ 71,000. Smith Products demands an annual return of 12% 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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