YearProject AProject B2.(200,000)(200,000)80,000100,00080,000100,000380,000100,0004.80,000a. If the opportunity cost of capital is 11%, which of these projects is worth pursuing? Findthe NPV of both projects.

year project A project B 0 -200000 -200000 1 80000 100000 2 80000 100000 3 80000 100000 4…

Year Project A Project B 2. (200,000) (200,000) 80,000 100,000 1 80,000 100,000 80,000 100,000 3 4. 80,000 a. If the opportunity cost of capital is 11%, which of these projects is worth pursuing? Find the NPV of both projects.

Year Project A Project B 2. (200,000) (200,000) 80,000 100,000 1 80,000 100,000 80,000 100,000 3 4. 80,000 a. If the opportunity cost of capital is 11%, which of these projects is worth pursuing? Find the NPV of both projects.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

100%

Year
Project A
Project B
2.
(200,000)
(200,000)
80,000
100,000
80,000
100,000
3
80,000
100,000
4.
80,000
a. If the opportunity cost of capital is 11%, which of these projects is worth pursuing? Find
the NPV of both projects.

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