a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=650/1.071+1950/1.071^2+13000/1.071^10
=$8854.03
NPV=Present value of inflows-Present value of outflows
=$8854.03-$13000
=($4145.97)(Approx)(Negative).
Hence since NPV is negative;opportunity must rejected.
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=650/1.031+1950/1.031^2+13000/1.031^10
=$12044.76
NPV=Present value of inflows-Present value of outflows
=$12044.76-$13000
=($955.24)(Approx)(Negative).
Hence since NPV is negative;opportunity must rejected.
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