Question: Consider the following alternative projects. Each project would last for five years. Project V Project W Initial investment $80,000 $60,000 Annual net cash inflows 20,000

Consider the following alternative projects. Each project would last for five years.

Project V Project W

Initial investment $80,000 $60,000

Annual net cash inflows 20,000 16,000

Salvage value 10,000 8,000

The company uses a discount rate of 14% to evaluate projects. Which of the following statements is true? Provide step-by-step/detailed solutions.

  1. NPV of Project V > NPV of Project W by $5,230
  2. NPV of Project W > NPV of Project V by $5,230
  3. NPV of Project V > NPV of Project W by $2,000
  4. NPV of Project W > NPV of Project V by $2,000

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