Question: Background : Projects S and T have the following initial investments and expected cash flows over five years. Calculate the NPVs using a discount rate
Background: Projects S and T have the following initial investments and expected cash flows over five years. Calculate the NPVs using a discount rate of 11%.
Cash Flows:
Year | Project S | Project T |
0 | -$14,000 | -$16,000 |
1 | $4,000 | $5,000 |
2 | $5,000 | $6,000 |
3 | $6,000 | $7,000 |
4 | $7,000 | $8,000 |
5 | $8,000 | $9,000 |
Requirements:
- Calculate the NPV for each project using a discount rate of 11%.
- State your accept/reject decision for each project.
- If the projects were independent, what would be your accept/reject decision?
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