Question

Two projects have the same initial cost. Project A has estimated cash flows of $1,000, $2,000, $3,000, $4,000 at the end of years 1 to 4 respectively. Project B has estimated cash flows of $4,000, $3,000, $2,000, $1,000 at the end of years 1 to 4 respectively. Which project will have the greater NPV assuming a positive discount rate? Select one: a. The NPV will be the same for both Project A and Project B b. Project B c. Project A d. Cannot determine from the information given.

Answer #1

Assume a project will cost $10,000. Expected Cash Flows to be
received are $2,000 per year at end of years 1 & 2, then $4,000
per year at end of years 3 & 4 and $5,000 at the end of year 5.
No cash flows beyond year 5. Discount rate is 10%.
What is the NPV (value created)?

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A
Project B
Year
Cash
Flow
Cash Flow
0
-$11,000
-$9,000
1
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6,000
2
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3
5,000
3,000
4
9,000
2,000
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projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$11,000 -$9,000 1 3,500 6,000 2 3,000
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crossover rate?) Enter your answer rounded to two decimal places.
Do not enter % in the answer box. For example, if your...

A firm must choose between two mutually exclusive projects, A
& B. Project A has an initial cost of $11000. Its projected net
cash flows are $900, $2000, $3000, $4000, and $5000 at the end of
years 1 through 5, respectively. Project B has an initial cost of
$15000, and its projected net cash flows are $7000, $5000, $3000,
$2000, and $1000 at the end of years 1 through 5, respectively. If
the firm’s cost of capital is 6.00%:
A....

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years 1 through 5, respectively. Project B has an initial cost of
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& B. Project A has an initial cost of $11000. Its projected net
cash flows are $900, $2000, $3000, $4000, and $5000 at the end of
years 1 through 5, respectively. Project B has an initial cost of
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rate is 9 percent? Which project should be accepted if the discount
rate is 6 percent?

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