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Determine the net present value of project

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Problem - Project 1 requires an original investment of $50,000. The project will yield cash flows of $12,000 per year for seven years. Project 2 has a calculated net present value of $8,900 over a five-year life. Project 1 could be sold at the end of five years for a price of $30,000.

Required -

(a) Determine the net present value of Project 1 over a five-year life, with residual value, assuming a minimum rate of return of 12%.

(b) Which project provides the greatest net present value?

Reference no: EM132772279

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