Question: Consider the following two mutually exclusive projects: Net Cash Flow End of year Project A Project B 0 $1,000 $1,000 1 $816 $262 2 $612

Consider the following two mutually exclusive projects:

Net Cash Flow

End of year

Project A

Project B

0

$1,000

$1,000

1

$816

$262

2

$612

$524

3

$408

$786

4

$204

$1,048

i=24% per year.(a) At an interest rate of 24%, which project would you recommend choosing?The present worth of Project A is

$356.36356.36.

(Round to the nearest cent.)The present worth of Project B is

$407.60407.60.

(Round to the nearest cent.)

Which project should be selected? Choose the correct answer below.

Project A

Project B

Your answer is correct.

(b) Compute the area of negative project balance, discounted payback period, and area of positive project balance for each project. Fill in the table below. (Round to the nearest dollar.)

Project Balances

n

A

B

0

$1000

1000

1

$ 424

$978

2

$686

$689

3

$515

$68

4

$843

$964

The discounted payback period of Project A is

2 year(s).

(Round up to the nearest whole number.)The discounted payback period of Project B is

4year(s).

(Round up to the nearest whole number.)Which project is exposed to a higher risk of loss if either project terminates at the end of year 2.

need help with part B of the question til fill out the chart for A column and B column

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!