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Calculate the nvp of the projects

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Question - A company is considering two mutually exclusive competing projects, A and B, each requiring an up-front outlay of $2 million. The expected future cash flows associated with each of the projects ($'000, stated in nominal terms) are contained the following table (ignoring inflation factors):

Year

1

2

3

4

Project A

800

500

1,200

600

Project B

0

200

1,600

1,900

The company's cost of capital is 12%.

Required - Calculate the NVP of the projects and advise the company of the appropriate capital investment decision.

Reference no: EM133170168

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