Question: 5.Below are the cash flows for two projects. Year Project A Project B 0 -42,000 -55,000 1 15,000 20,000 2 15,000 18,000 3 14,000 17,000

5.Below are the cash flows for two projects.

Year

Project A

Project B

0

-42,000

-55,000

1

15,000

20,000

2

15,000

18,000

3

14,000

17,000

4

14,000

20,000

5

14,000

19,000

  1. Graph the NPV profiles for each project.
  2. At what rate will the two projects have the same NPV?
    1. Compute the profitability index for both projects. Use a 10% interest rate.
  3. Compute NPV using a 10% rate.
  4. Which project would you choose?

Please explain how you determine the NPV rates in question 1! Thanks!

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