PRATICE QUESTION

Tropical Plantation just acquired an empty land in Oahu, Hawaii, which is good to grow either crop A or crop B, but not both at the same time. Given below are the cash flows associated with growing crop A and crop B. The negative cash flow in year 0 indicate initial investments. The appropriate discount rate is 15% for growing both crops.

Year	0	1	2	3	4
Crop A	-100	40	50	62	0
Crop B	-73	30	30	30	30

1. The NPV of growing crop A is .

2. The NPV of growing crop B is .

3. Based on the NPV rule, Tropical Plantation should grow crop . (Answer A or B.)

4. The ROI of growing crop A is .

5. The ROI of growing crop B is .

6. Based on the ROI rule, Tropical Plantation should grow crop . (Answer A or B.)

Answer rating: 100% (QA)

To calculate the NPV Net Present Value and ROI Return on Investment for both crops we need to discou... View the full answer