Question 1
A company is deciding among two mutually exclusive projects. Project A’s initial cost is $40,000, and Project B’s initial cost is 30,000. The two projects have the following cash flows:
Project A Project B
Year Cash Flow Cash Flow
1 10,000 8,000
2 15,000 12,000
3 20,000 20,000
4 20,000 15,000
The company's weighted average cost of capital is 11 percent. What is the net present value (NPV) of the project A?
1. 
8,982 

2. 
7,090 

3. 
7,450 

4. 
8,630 

5. 
9,155 

1.8,982
Year  Cash Flow  Discount factor  Present Value 
a  b  c=1.11^a  d=b*c 
0  40,000.00  1.0000  40,000 
1  10,000.00  0.9009  9,009 
2  15,000.00  0.8116  12,174 
3  20,000.00  0.7312  14,624 
4  20,000.00  0.6587  13,175 
NPV  8,982 
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