Chapter 12, Problem 12.3P

a)

Summary Introduction

To determine: The NPV of each project and determine whether the project is acceptable.

Introduction:

Net present value:

NPV refers to the discounted value of the future cash flows at present. The company should accept the project even if NPV is positive or greater than zero. If there are two mutually exclusive projects, then the company has to select the project that has a higher net present value.

b)

Summary Introduction

To determine: The breakeven cash inflow of the each project.

c)

Summary Introduction

To determine: The probability of each project that will achieve at least the breakeven cash inflow.

d)

Summary Introduction

To discuss: The project that is more risky and project that has higher NPV.

e)

Summary Introduction

To discuss: The Person X recommendation when the company minimizes its losses.