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Required rate of return on these projects

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Reference no: EM131751032

Assume a firm is considering to invest and it has estimated the cash outflows (costs) and cash inflows of the underlined projects as follows. The projects have a five year life.

year                Project A cash flows              Project B cash flows

0                               ($8,000)                                  ($8,000)

1                                 12,625                                       0

2                                 0                                             5,000

3                                 15,625                                       0

4                                 0                                                0

5                                 100,625                                 130,000

Task: If the required rate of return on these projects is 8%, which project would be acceptable and why?  Base your decision on NPV calculations.

Reference no: EM131751032

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