Question

NPV unequal

lives.

Singing Fish Fine Foods has

​$1,920,000

for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the​ store's deli section for additional food service. The estimated​ after-tax cash flow of this project is

​$570,000

per year for the next five years. Project 2 is updating the​ store's wine section. The estimated annual​ after-tax cash flow for this project is

​$530,000

for the next six years. If the appropriate discount rate for the deli expansion is

9.5​%

and the appropriate discount rate for the wine section is

9.0​%,

use the NPV to determine which project Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalent annual annuity. Does the decision​ change?

If the appropriate discount rate for the deli expansion is

9.5​%,

what is the NPV of the deli​ expansion?

​$268,634.01268,634.01  

​(Round to the nearest​ cent.)If the appropriate discount rate for the wine section is

9.0​%,

what is the NPV of the wine​ section?

​$457,536.85457,536.85  

​(Round to the nearest​ cent.)Based on the​ NPV, Singing Fish Fine Foods should pick the

wine section

project.  ​(Select from the​ drop-down menu.)

What is the adjusted NPV equivalent annual annuity of the deli​ expansion?

​$69,962.0869,962.08  

​(Round to the nearest​ cent.)

What is the adjusted NPV equivalent annual annuity of the wine​ section?

​$101,994.01101,994.01  

​(Round to the nearest​ cent.)Based on the adjusted​ NPV, Singing Fish Fine Foods should pick the

wine section

project.  ​(Select from the​ drop-down menu.)Does the decision​ change?

No

  ​(Select from the​ drop-down menu.)

Answer 1