IVEEK 5 PRACTICAL EXERCISE Project A NPV at a 20% Discount Rate is Projed B NPV at a 20% Discount Rate is The Project that should be selected at 20% is Projed A NPV at a 10% Discoun Rate is Project B NPV al a 10% Discount Rale is The Project that should be selected at 10% is General Information Regarding the Solution of this Problem: - The Present Value of Money to be received in the future is calculated by the formula: PRESENT VALUE = FUTURE VALUE I PRESENT VALUE FACTOR PV=FVPVForPV=FV[1/(1+i)]=InterestRate=NumberofInvestmentPeriods - Net Present Value (NPV) is the present value of future cash flows related to an investment minus the initial irvestment cost. - Discount Rate (or Cost of Capital or Hurdle Rate) is the return rate required to undertake a project. - Net Operating Casb Flow is the result of subtracting the cash ourflows from the cash inflous. If you compare this problem to the examiple from page 314 of the text, you will note that we are shipping lines AI since we have been given the Net Operating Cash Flow; we are not required to calculate it. Steps in Completing this Exercise: You will have to follow each of these steps for both 20% and 10% for each project. Once you have made all your calculations, you must fill in the blanks at the botton of the page and indicate which project should be selected for each