27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Net present value—unequal lives

Project A requires an original investment of $32,600. The project will yield cash flows of $7,000 per year for nine years. Project B has a calculated net present value of $3,500 over a six-year life. Project A could lie sold at the end of six years for a price of $15,000. (a) Determine the net present value of Project A over a six-year life, with residual value, assuming a minimum rate of return of 12%. (b) Which project provides the greatest net present value?


To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

To determine: The net present value of the Project A.


The net present value of the project is $3,782.

Working Note:

Calculation of NPV of the Project A:



To determine
The project that provides the greatest net present value.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Describe the major leadership styles.

Foundations of Business (MindTap Course List)

What is inflation and what causes it?

Principles of Macroeconomics (MindTap Course List)

Why is historical experience often a poor basis for establishing standards?

Managerial Accounting: The Cornerstone of Business Decision-Making

PV AND A LAWSUIT SETTLEMENT It is now December 31,2013 (t = 0), and a jury just found in favor of a woman who s...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Discuss some of the reasons for budgeting.

Cornerstones of Cost Management (Cornerstones Series)