Question: Computing net present value. Hammersmith Homes is considering lour possible housing development projects, each requiring an initial investment of $5,000,000. The cash inflows from each

Computing net present value. Hammersmith Homes is considering lour possible housing development projects, each requiring an initial investment of $5,000,000.

The cash inflows from each of the projects follow : Year Project A Project B Project C Project D 1 $2,000,000 $4,000,000

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 the others.

Year Project A Project B Project C Project D 1 $2,000,000 $4,000,000 $1,000,000 234 60 2 2,000,000 2,000,000 0 2,500,000 2,000,000 2.000.000 3,000,000 2,000,000 1.000.000 2.500.000 5 2,000,000 1,000,000 $10,000,000 1,000,000

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