Please show step by step Net Present Value—Unequal Lives Project 1 requires an original investment of $90,100. The project will yield cash flows of $22,000 per year for five years. Project 2 has a calculated net present value of $29,300 over a three-year life. Project 1 could be sold at the end of three years for a price of $81,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. a. Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum rate of return of 10%. If required, round to the nearest dollar. b. Which project provides the greatest net present value?
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Project 1 requires an original investment of $90,100. The project will yield cash flows of $22,000 per year for five years. Project 2 has a calculated net present value of $29,300 over a three-year life. Project 1 could be sold at the end of three years for a price of $81,000.
Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below.
a. Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum
b. Which project provides the greatest net present value?
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why preset value is different?
PV of Cash flow = (CFAT × PVIFA @10%, 3 Years) = ($22,000 × 2.4869)
PV of Cash flow = $54,711.8
PV of Residual value = (Residual value × PVIF @10%, 3 Years) = ($81,000 × 0.7513)
PV of Residual value = $60,855.3
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