Question

Fortive is evaluating two investment opportunities, each of require the upfront expenditure noted below. The estimated cash flows and discount rate for each are as follows:

	Year 0	Year 1	Year 2	Year 3
Project A	($7,000)	$5,500	$2,500	$1,500
Project B	($7,000)	$1,500	$2,500	$5,500

Show a timeline of cashflows for each project. What is the NPV of each project at a discount rate of 5%? What is the NPV of each project at a discount rate of 14%?

Answer 1

NPV at 5%
Particulars	Project A	Project B
Year 0 - Outflow	-7,000.00	-7,000.00
Year 1 - Inflow	5,238.10	1,428.57
Year 2 - Inflow	2,267.57	2,267.57
Year 3 - Inflow	1,295.76	4,751.11
NPV	1,801.43	1,447.25
NPV at 14%
Particulars	Project A	Project B
Year 0 - Outflow	-7,000.00	-7,000.00
Year 1 - Inflow	4,824.56	1,315.79
Year 2 - Inflow	1,923.67	1,923.67
Year 3 - Inflow	1,012.46	3,712.34
NPV	760.69	-48.20