Question: APPLY THE CONCEPTS: Net present value and Present value index Darling Manufacturing is looking to invest in Project A or Project B. The data surrounding
APPLY THE CONCEPTS: Net present value and Present value index
| Darling Manufacturing is looking to invest in Project A or Project B. The data surrounding each project is provided below. Darling's cost of capital is 8%. | |
| Project A | Project B |
| This project requires an initial investment of $165,000. The project will have a life of 8 years. Annual revenues associated with the project will be $130,000 and expenses associated with the project will be $35,000. | This project requires an initial investment of $137,500. The project will have a life of 7 years. Annual revenues associated with the project will be $105,000 and expenses associated with the project will be $60,000. |
Calculate the net present value and the present value index for each project using the present value tables provided below.
Present Value of $1 (a single sum) at Compound Interest.
Present Value of an Annuity of $1 at Compound Interest.
| Note: | |
| Use a minus sign to indicate a negative NPV. | |
| If an amount is zero, enter "0". | |
| Enter the present value index to 2 decimals. | |
| Project A | Project B | |||
| Total present value of net cash flow | $fill in the blank fac76707b03bfc9_1 | $fill in the blank fac76707b03bfc9_2 | ||
| Amount to be invested | fill in the blank fac76707b03bfc9_3 | fill in the blank fac76707b03bfc9_4 | ||
| Net present value | $fill in the blank fac76707b03bfc9_5 | $fill in the blank fac76707b03bfc9_6 | ||
| Present value index: | ||||
| Project A | fill in the blank fac76707b03bfc9_7 | |||
| Project B | fill in the blank fac76707b03bfc9_8 | |||
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