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A firm is considering two projects, A and B. Each project will last for 4 years....

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Finance

A firm is considering two projects, A and B. Each project willlast for 4 years. The projects are INDEPENDENT. The projected cashflows for each project are shown below:

Year 0 1 2 3 4

Project A -20.00 8.00 8.00 6.00 4.00

Project B -30.00 10.00 10.00 11.00 9.00

The cost of capital for the firm is 10.00%. What is the NPV forproject A at the cost of capital?

Answer Format: Currency: Round to: 2 decimal places.

Answer & Explanation Solved by verified expert
3.6 Ratings (665 Votes)

Present Value
Year Project A Project B DF at 10% Project A Project B
A B C D = A x C E = B x C
0 -20 -30              1.0000 $           (20.00) $           (30.00)
1 8 10              0.9091 $               7.27 $               9.09
2 8 10              0.8264 $               6.61 $               8.26
3 6 11              0.7513 $               4.51 $               8.26
4 4 9              0.6830 $               2.73 $               6.15
NPV = Sum total $                      1.12 $                      1.77
So NPV for project A is $1.12

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Transcribed Image Text

A firm is considering two projects, A and B. Each project willlast for 4 years. The projects are INDEPENDENT. The projected cashflows for each project are shown below:Year 0 1 2 3 4Project A -20.00 8.00 8.00 6.00 4.00Project B -30.00 10.00 10.00 11.00 9.00The cost of capital for the firm is 10.00%. What is the NPV forproject A at the cost of capital?Answer Format: Currency: Round to: 2 decimal places.

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