Calculate NPV for each project

Assignment Help Financial Management
Reference no: EM131861300

Consider the following cash flows on two mutually exclusive projects:

Year Project A Project B

0 –$ 52,000 –$ 67,000

1 32,000 31,000

2 27,000 40,000

3 22,000 43,000

The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Which project should you choose? Project A Project B.

Reference no: EM131861300

Questions Cloud

Capital recovery and annual worth : If Brent estimates that Beck leased at most $ 20,000 a year to increase income from using trucks, Will the truck purchases benefit economically?
What is the total amount of interest the bank received : A company has a $12 million credit line with a bank. What is the total amount of interest the bank received, and the total fee income?
Selling stock with commissions : How much money do you receive after selling 210 shares of Nokia Corporation (NOK), which trades at $23.92?
What is the current price of this bond : Demetrius wants to buy a $1,000 face value bond that currently has a yield to maturity of 8.74 percent. What is the current price of this bond?
Calculate NPV for each project : The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. Calculate the NPV for each project.
Net cash flows from the company operations : What is the present value of the net cash flows from the company’s operations?
Hired as a consultant for pristine urban-tech zither : You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. What is the NPV of the project?
River cruises is all-equity-financed : River Cruises is all-equity-financed with 100,000 shares. What is the ratio after it borrows?
As winner of recruiting competition : As winner of a recruiting competition, you can choose one of the prizes given below. If the interest rate is 10%, which prize do you think is worth the most?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the smallest expected loss for your portfolio

Your portfolio allocates equal amounts to three stocks. All three stocks have the same mean annual return of 11 percent. Annual return standard deviations for these three stocks are 26 percent, 36 percent, and 46 percent. The return correlations amon..

  What is the reward-to-risk ratio in equilibrium

Consider an asset with a beta of 1.2, a risk-free rate of 5%, and a market return of 13%. What is the reward-to-risk ratio in equilibrium? What is the expected return on the asset?

  Result in the dissolution of a partnership

Which of the following will result in the dissolution of a partnership?

  Define the term tax evasion

Define the term "tax evasion". List TWO of the three main tax bases used in developed countries

  Using spot and forward exchange rates

Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the Canadian dollar is Can$1.04 and the six-month forward rate is Can$1.06.  Which is worth more, a U.S. dollar or a Canadian dollar?

  The net income and the retained earnings

The Net Income is $100; and the Retained Earnings are $10. The Equity at the End of the Year was valued at $500 and at $250 at the Beginning of the Year. The EBIT of this Firm was $600 and the EBT was $575. The Debt at the end of the year was $650 an..

  What rate of growth must be expected for spencer

Spencer Supplies's stock is currently selling for $60 per share. The firm is expected to earn $5.10 per share this year and to pay a year-end dividend of $3.70. If investors require a 8.5% return, what rate of growth must be expected for Spencer?

  How much profit did he make on his investment

Jason Mathews purchased 150 shares of the Hodge & Mattox Energy fund. Each share cost $24.25. Fifteen months later, he decided to sell his shares when the share value reached $28.50. a. What is the amount of his total initial investment? b. What was ..

  Depth analysis of the performance of the company

Provide a brief summary of additional information which you would require in order to enable a more in depth analysis of the performance of the company and comment upon the financial position of JH Alarms plc in the light of the last three years' ..

  What would the new equity be worth

The risk-free rate is 4%; the equity premium is 3%. What is the firm's beta? The firm is pondering a recapitalization to $1,000 debt, which would increase the debt's interest rate to 8%.

  What is the NPV of this investment

Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $820,322, $863,275, $937,250, $1,017,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..

  Different ways one can mitigate exchange rate risk

Is there really any difference between the different ways one can mitigate exchange rate risk? If so, is one form of exchange rate risk mitigation superior to another? Defend answer

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd