Project A requires an original investment of $55,400. The project will yield cash flows of $15,800...

 

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Project A requires an original investment of $55,400. The project will yield cash flows of $15,800 per year for 4 years. Project B has a computed net present value of $2,800 over a 4-year life. Project A could be sold at the end of 4 years for $16,300. Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. $ b. Which project provides the greatest net present value? Project A requires an original investment of $55,400. The project will yield cash flows of $15,800 per year for 4 years. Project B has a computed net present value of $2,800 over a 4-year life. Project A could be sold at the end of 4 years for $16,300. Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. $ b. Which project provides the greatest net present value?

Answer rating: 100% (QA)

a To determine the net present value NPV of Project A we need to calculate the present value PV of t... View the full answer