Business
Engineering
Math
Science
Social ScienceYearProject AProject B0 –$51,000 –$66,000 1 31,000 30,000 2 26,000 39,000 3 21,000 42,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 14 percent and the inflation rate is 5 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A NPV:Project B NPV:
| Year | Project A | Project B | ||
| 0 | –$ | 51,000 | –$ | 66,000 |
| 1 | 31,000 | 30,000 | ||
| 2 | 26,000 | 39,000 | ||
| 3 | 21,000 | 42,000 | ||
|
The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 14 percent and the inflation rate is 5 percent. |
|
Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
Project A NPV:
Project B NPV:
Expert Answer
NPV refers to the net present value of a project or investment. The formula used to determine NPV of a project is:
Given that the cash flows of Project A are expressed in real terms, so we need to discount the cash flows of project A using the real rate.
Cash flows of Project B are expressed in...
Business
Finance
Related Finance Q&A
Q: Rob Thomas Traders opened an account to short-sell 1,000 shares of WeWork at $60. The initial margin...
A: When the money borrowed from the broker for making an investment is made then it is called margin tr...
Q: If the Rhine Company ignores the possibility that other firms may enter its market, it should set a ...
A: Calculation of present value of earning (PVOE) using excel when the price of product is $10,000:
Q: Assume that you manage a risky portfolio with an expected return of18% and a standard deviation of 2...
A: a.The expected return of portfolio can be computed by the following equation:
Q: A multinational company that specializes in global finance, trade and risk management has numerous r...
A: In order to reduce cost, the firm should have:Centralized operationsCentralized decision making
Q: You want to endow a scholarship that will pay $11,000 per year forever, starting one year from now. ...
A: Framework:If P is the perpetuity and r is the discount rate, then PV of a perpetuity = P / rAmount t...
Q: An investment has a cost of $3500. The investment will have a payout at the end of the first year. ...
A: Approach: Let's assume the desired minimum payout is P.We will roll out the yearly payout projection...
Q: A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north o...
A: 1) To set up a new a mine in a mountain which is 150 kms north of Johannesburg, the company would sp...
Q: Atlantic Corporation is the largest logging company in the north eastern part of the United States. ...
A: a.Calculate the value of the stock as follows:
Q: How do I calculate the variance of the portfolio as shown in the image?
A: Calculating Variance is simple, but one needs to follow the certain steps to reach the answer. First...
