# Project A requires an original investment of $ 22,500. The project will yield cash flows of $

## Question:

Project A requires an original investment of $ 22,500. The project will yield cash flows of $ 5,000 per year for nine years. Project B has a calculated net present value of $ 3,500 over a six-year life. Project A could be sold at the end of six years for a price of $ 12,000.

(a) Determine the net present value of Project A over a six-year life, with residual value, assuming a minimum rate of return of 12%.

(b) Which project provides the greatest net present value?

What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...

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**Related Book For**

## Financial and Managerial Accounting

**ISBN:** 978-1285078571

12th edition

**Authors:** Carl S. Warren, James M. Reeve, Jonathan Duchac