Solution-Annual effective interest rate

Annual effective interest rate

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Reference no: EM131381921

Two projects have equal net present values when calculated using a 6% annual effective interest rate. Project 1 requires an investment of $20,000 immediately and will return $8,000 at the end of one year and $15,000 at the end of two years. Project 2 requires investments of $10,000 immediately and $X in two years. It will return $3,000 at the end of one year and $14,000 at the end of three years. Find the difference in the net present values of the two projects if they are calculating using a 5% annual effective interest rate.

Reference no: EM131381921

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Annual effective interest rate

Reference no: EM131381921

Reference no: EM131381921

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