Question

Sandia corporation is considering two mutually exclusive projects. For our purposes, we will call them projects A and B. Project A is expected to cost $40,739, and project B is expected to cost $40,834.

Each project's expected cash flows are presented below. Both project A and B have similar risks to all other projects at Sandia. And the weighted average cost of capital for Sandia is 14.66%. Calculate the net present value of both projects, and enter in the box below how much the value of the firm is expected to increase based on this capital budget (please enter the amount to the nearest penny).

	Project A	Project B
Year 1	$10,932	$12,255
Year 2	$10,054	$13,476
Year 3	$10,985	$10,198
Year 4	$12,815	$11,788
Year 5	$12,497	$14,843

Answer 1

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