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Liberty University *

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530

Subject

Finance

Date

Feb 20, 2024

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1

Uploaded by ProfOkapiPerson648

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The following are the cash flows of two projects: Year Project A ProjectB 0 $(260) $ (260) 160 1 140 2 140 160 3 140 160 B 140 . Calculate the NPV for both projects if the discount rate is 11%. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Project NPV $ . 1% Project A - 174.34 $ /1% Project B " 130.99 . Suppose that you can choose only one of these projects. Which would you choose? ProjectA @ Explanation: Some values below may be shown as rounded for display purposes, though unrounded numbers should be used for actual calculations. . NPVA = =$260 + [$140 X Annuity factor (11%, 4 periods)] = -$260 + $140 x | gy~ gk 7 817434 NPVB = —$260 + [$160 X Annuity factor (11%, 3 periods)] = -8260 + $160 * | glrj~ il $130.99 . Since you can only choose one project, select the one with the higher positive NPV. "Project A" is better. Calculator computations: . CF0 =-260 CO1=140,FO1=4 =11 NPV CPT = 174.34 . CFO = -260 CO1 =160, FO1=3 =1 NPV CPT = 130.99
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