Project A requires an original investment of $62,700. The project will yield cash flows of...
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Accounting
Project A requires an original investment of $62,700. The project will yield cash flows of $17,600 per year for 4 years. Project B has a computed net present value of $3,750 over a 4-year life. Project A could be sold at the end of 4 years for a price of $19,800.
Following is a table for the present value of $1 at compound interest:
Year
6%
10%
12%
1
0.943
0.909
0.893
2
0.890
0.826
0.797
3
0.840
0.751
0.712
4
0.792
0.683
0.636
5
0.747
0.621
0.567
Following is a table for the present value of an annuity of $1 at compound interest:
Year
6%
10%
12%
1
0.943
0.909
0.893
2
1.833
1.736
1.690
3
2.673
2.487
2.402
4
3.465
3.170
3.037
5
4.212
3.791
3.605
Use the tables above.
a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. _______
b. Which project provides the greatest net present value?b. Which project provides the greatest net present value? ______
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