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Initial investment (CF) Year (t) 1 2 3 4 5 6 7 8 9 10 Project A $26,000 $4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Project B Project C $500,000 $170,000 Cash inflows (CF₁) $100,000 $20,000 120,000 19,000 140,000 160,000 180,000 200,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 Project D $950,000 Project E $80,000 $230,000 $ 230,000 230,000 230,000 230,000 230,000 230,000 230,000 0 0 0 20,000 30,000 0 50,000 60,000 70,000

Initial investment (CF) Year (t) 1 2 3 4 5 6 7 8 9 10 Project A $26,000 $4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Project B Project C $500,000 $170,000 Cash inflows (CF₁) $100,000 $20,000 120,000 19,000 140,000 160,000 180,000 200,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 Project D $950,000 Project E $80,000 $230,000 $ 230,000 230,000 230,000 230,000 230,000 230,000 230,000 0 0 0 20,000 30,000 0 50,000 60,000 70,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Using a 14% cost of capital, calculate the net present value for each of the independent projects shown in the following table, and indicate whether each is acceptable.

Initial investment (CF) Year (t) 1 2 3 4 5 67990 8 10 Project A $26,000 $4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Project B Project C $500,000 $170,000 140,000 160,000 180,000 200,000 Project D $950,000 Cash inflows (CF,) $100,000 $20,000 $230,000 $ 120,000 19,000 230,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 230,000 230,000 230,000 Project E $80,000 230,000 230,000 230,000 0 0 20,000 30,000 0 50,000 60,000 70,000
Transcribed Image Text:Initial investment (CF) Year (t) 1 2 3 4 5 67990 8 10 Project A $26,000 $4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Project B Project C $500,000 $170,000 140,000 160,000 180,000 200,000 Project D $950,000 Cash inflows (CF,) $100,000 $20,000 $230,000 $ 120,000 19,000 230,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 230,000 230,000 230,000 Project E $80,000 230,000 230,000 230,000 0 0 20,000 30,000 0 50,000 60,000 70,000
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