Net Present Value calculation:
Project | A | B | C | D |
First Cost | 1000 | 800 | 600 | 500 |
Uniform Annual Benefit | 152 | 120 | 97 | 122 |
Discounting Factor (PVAF(8y,12%) | 4.968 | 4.968 | 4.968 | 4.968 |
Present Value of Cash flows | 755 | 596 | 482 | 606 |
Salvage Value | 750 | 500 | 500 | 0 |
Discounting Factor (PVF(8y,12%) | 0.404 | 0.404 | 0.404 | 0.404 |
Present Value of Slavage Value | 303 | 202 | 202 | 0 |
Present Value of total Cash Inflows | 1058 | 798 | 684 | 606 |
Net Present Value | 58 | -2 | 84 | 106 |
Since, NPV of Project D is the highest, Poject D shoud be selected.
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