Assuming a 10% discount rate,calculate the NPV of the four projects and rank the projects inorder of preference. Show steps.

1. Growth Enterprise, Inc. (GEI) has $40 million that it can invest in any or all of the four capital investment projects (A, B, C, D), which have cash flows as shown in the following table. Table 1. Comparison of Project Cash Flows ($ thousand dollars) Project Type of Year 0 Year 1 Year 2 Year 3 cash flow A. Investment -$10,000 Revenue $21,000 Operating $11,000 expense 0 olo B. -$10,000 | Investment Revenue Operating expense $15,000 $5,833 $17,000 $7,833 -$10,000 0 0 Investment Revenue Operating expense $10,000 $5,555 $11,000 $4,889 $30,000 $15,555 0 Investment -$10,000 0 Revenue $30,000 $10,000 Operating $15,555 $5,555 expense ? All revenues and operating expenses can be considered cash items. 0 $5,000 $2,222 Each of these projects is considered to be of equivalent risk. The investment will be depreciated to zero on a straight-line basis for tax purpose. For simplicity, the depreciation per year for a project is equal to the project investment value divided by the life of the project. Project A has 1-year life, Project B has two-year life, and both Project C and D have 3-yar life. GEI's marginal corporate tax rate on taxable income is 40%. None of the projects will have any salvage value at the end of their respective lives.

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Table 1. Comparison of Project Cash Flows ($ thousand dollars) Project Year 0 Year 1 Year 2 Type of cash flow Investment Revenue Operating expense A. B. C. 1. Growth Enterprise, Inc. (GEI) has $40 million that it can invest in any or all of the four capital investment projects (A, B, C, D), which have cash flows as shown in the following table. D. -$10,000 0 0 Investment -$10,000 Revenue 0 Operating 0 expense Investment Revenue Operating expense -$10,000 0 0 0 $21,000 $11,000 0 $15,000 $5,833 0 $10,000 $5,555 0 0 0 0 $30,000 $15,555 0 $17,000 $7,833 0 $11,000 $4,889 Investment -$10,000 Revenue 0 Operating 0 expense All revenues and operating expenses can be considered cash items. 0 $10,000 $5,555 Year 3 0 0 0 0 Ooo 0 $30,000 $15,555 0 $5,000 $2,222 Each of these projects is considered to be of equivalent risk. The investment will be depreciated to zero on a straight-line basis for tax purpose. For simplicity, the depreciation per year for a project is equal to the project investment value divided by the life of the project. Project A has 1-year life, Project B has two-year life, and both Project C and D have 3-yar life. GEI's marginal corporate tax rate on taxable income is 40%. None of the projects will have any salvage value at the end of their respective lives. Table 1. Comparison of Project Cash Flows ($ thousand dollars) Project Year 0 Year 1 Year 2 Type of cash flow Investment Revenue Operating expense A. B. C. 1. Growth Enterprise, Inc. (GEI) has $40 million that it can invest in any or all of the four capital investment projects (A, B, C, D), which have cash flows as shown in the following table. D. -$10,000 0 0 Investment -$10,000 Revenue 0 Operating 0 expense Investment Revenue Operating expense -$10,000 0 0 0 $21,000 $11,000 0 $15,000 $5,833 0 $10,000 $5,555 0 0 0 0 $30,000 $15,555 0 $17,000 $7,833 0 $11,000 $4,889 Investment -$10,000 Revenue 0 Operating 0 expense All revenues and operating expenses can be considered cash items. 0 $10,000 $5,555 Year 3 0 0 0 0 Ooo 0 $30,000 $15,555 0 $5,000 $2,222 Each of these projects is considered to be of equivalent risk. The investment will be depreciated to zero on a straight-line basis for tax purpose. For simplicity, the depreciation per year for a project is equal to the project investment value divided by the life of the project. Project A has 1-year life, Project B has two-year life, and both Project C and D have 3-yar life. GEI's marginal corporate tax rate on taxable income is 40%. None of the projects will have any salvage value at the end of their respective lives.

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A Year 0 Year 1 Revenue 2100000 less operating expense 1100000 less depreciation 1000000 EBIT 000 Ta... View the full answer