Darling Corp. is looking to invest in Project A or Project B. The data surrounding each project is provided below. Darling's cost of capital is 10%.

Project A

This project requires an initial investment of $165,000. The project will have a life of 3 years. Annual revenues associated with the project will be $130,000 and expenses associated with the project will be $35,000.

Project B

This project requires an initial investment of $132,500. The project will have a life of 5 years. Annual revenues associated with the project will be $113,000 and expenses associated with the project will be $60,000.

Calculate the net present value and the present value index for each project.

	Project A	Project B
Total present value of net cash flow:
Amount to be invested:	-165,000	-132,500
Net present value:

Present value index:

Project A: ___

Project B: ___

Based upon net present value, which project has the more favorable profit prospects?

Based upon the present value index, which project is ranked higher?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV and Present Value Index PVI for each project well use the following formulas Net Present Value NPV Total Presen... View the full answer