Question

. Use the NPV to decide which of the two projects Vita Nova should accept for...

. Use the NPV to decide which of the two projects Vita Nova should accept for Fall 2020 if the projects are independent:

      Years                                 Project 1                                              Project 2

        0                                      -$7,300                                                -$4,390

        1                                      $3,940                                               $2,170

        2                                      $3,450                                               $2,210

        3                                        $2,480                                               $1,730

       Assume the required rate of return is 15%.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculation of NPV at required rate of return is 15%.

PROJECT 1

Year Inflows PV factor@15% Present Value
1 3940 0.8696 3426
2 3450 0.7561 2609
3 2480 0.6575 1631
7666

Net Present Value = Total Present value of inflows - Initial investment

Here Initial investment of Project 1= 7300, Present value of inflows = 7666

NPV of PROJECT 1 = 7666 - 7300 = 366

PROJECT 2

Year Inflows PV factor@15% Present Value
1 2170 0.8696 1887
2 2210 0.7561 1671
3 1730 0.6575 1137
4695

Net Present Value = Total Present value of inflows - Initial investment

Here Initial investment of Project 2 = 4390, Present value of inflows = 4695

NPV of PROJECT 2 = 4695- 4390 = 305

Since NPV is higher, Project 1 can be accepted.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Morgan Corporation is trying to decide which one of two projects it should accept. Both projects...
Morgan Corporation is trying to decide which one of two projects it should accept. Both projects have the same start-up cost. Project 1 will produce annual cash flows of $52,000 a year for six years. Project 2 will produce cash flows of $48,000 a year for eight years. The company requires a 15 percent rate of return. Which project should the company select and why?
You are considering two independent projects both of which have been assigned a discount rate of...
You are considering two independent projects both of which have been assigned a discount rate of 15% percent. Based on the project NPV, what is your recommendation concerning these projects? Project A Project B Year Cash Flow Year Cash Flow 0 -$40,000 0 -$51,173 1 $35,000 1 $18,400 2 $27,000 2 $14,750 You should accept both projects. You should reject both projects. You should accept project B and reject project A. You should accept project A and reject project B....
Garage, Inc., has identified the following two projects: Year Cash flow (A) Cash flow(B) 0 -$29,000...
Garage, Inc., has identified the following two projects: Year Cash flow (A) Cash flow(B) 0 -$29,000 -$29,000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 A and B are independent projects. Assume that the required rate of return is 11 percent. 1. What is Project B's NPV? 2. A and B are independent projects. Assume that the required rate of return is 11 percent. Which project(s) should be accepted according to the NPV criterion? 3. A...
You are considering two independent projects with the following cash flows. The required return for both...
You are considering two independent projects with the following cash flows. The required return for both projects is 10%. Given this information, which one of the following statements is correct? Year  Project A  Project B 0    -950,000  -125,000 1      330,000    55,000 2      400,000    50,000 3      450,000      50,000 You should accept project B because it has the higher IRR and reject project A You should accept project A because it has the higher NPV and you can not accept both projects You should accept...
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 28,300 1 12,300 2 15,300 3 11,300 １.What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV    2.At a required return of 11 percent, should the firm accept this project? Yes No...
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 27,400 1 11,400 2 14,400 3 10,400 What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ At a required return of 12 percent, should the firm accept this project? No Yes...
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:    Year Cash Flow 0 –$ 28,800 1 12,800 2 15,800 3 11,800    What is the NPV for the project if the required return is 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))      NPV =$    At a required return of 10 percent, should the firm...
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:    Year Cash Flow 0 –$ 28,500 1 12,500 2 15,500 3 11,500    What is the NPV for the project if the required return is 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      NPV $       At a required return of 10 percent, should the firm accept...
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:    Year Cash Flow 0 –$ 27,500 1 11,500 2 14,500 3 10,500    What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ At a required return of 11 percent, should the firm accept this project?...
Assume we will accept the project if it pays back within two years. ◦Year 0: -155,000...
Assume we will accept the project if it pays back within two years. ◦Year 0: -155,000 ◦Year 1: 111,880 ◦Year 2: 131,080 Your required return for assets of this risk is 10%. Use NPV, Payback period and discounted payback period to decide if we accept or reject the project?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT