Question: Hammersmith Homes is considering four possible housing development projects, each requiring an initial investment of $5,000,000. The cash inflows from each of the projects follow:

Hammersmith Homes is considering four possible housing development projects, each requiring an initial investment of $5,000,000. The cash inflows from each of the projects follow:

a. Compute the net present value of each of the projects. Hammersmith€™s cost of capital is 15 percent.
b. Hammersmith can take on only one project; which should it choose? Explain why this project is superior to theothers.

Year $2,000,000 $4,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,000,000 Project A Project 8 Project C Project D 0 $1,000,000 0 2,500,000 0 3,000,000 0 2,500,000 2,000,000 1,000,000 $10,000,000 1,000,000 4

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