What is the benefit-cost ratio for the project

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Reference no: EM131993925

Two new wind-farm tower projects are proposed for a small company that installs them in south western Pennsylvania. Project A will cost $250,000 to and is expected to have an annual net cash flow of $75,000. Project B will cost $150,000 to  and should generate annual net cash flows of $52,000. As a small company, the owner and senior management team are very concerned about their cash flow.

A recent project nominated for consideration at your company has a four-year cash flow of $20,000; $25,000; $30,000; and $50,000. The cost of the project is $75,000.

a. If the required rate of return is 20%, conduct a discounted cash flow calculation to determine the NPV.

b. What is the benefit-cost ratio for the project?

c. What would the NPV of the above project be if the inflation rate was expected to be 4% in each of the next four years?

Reference no: EM131993925

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