The following information relates to two capital investment projects - Project A and Project B: Initial investment of both projects = $400,000 Useful life = 4 years Estimate cost of capital = 16% Scrap value of both projects = $0 Straight-line method of depreciation is used The estimated net profits of Project A over its useful life: Year Amount 1 $70,000 2 $50,000 3 $100,000 4 $30,000 Project B is expected to generate net cash flows of $140,000 per year over the four year period. Calculate net present value of each project
The following information relates to two capital investment projects - Project A and Project B: Initial investment of both projects = $400,000 Useful life = 4 years Estimate cost of capital = 16% Scrap value of both projects = $0 Straight-line method of depreciation is used The estimated net profits of Project A over its useful life: Year Amount 1 $70,000 2 $50,000 3 $100,000 4 $30,000 Project B is expected to generate net cash flows of $140,000 per year over the four year period. Calculate net present value of each project
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information relates to two capital investment projects - Project A and Project B:
Initial investment of both projects = $400,000
Useful life = 4 years
Estimate cost of capital = 16%
Scrap value of both projects = $0
Straight-line method of
The estimated net profits of Project A over its useful life:
| Year | Amount |
| 1 | $70,000 |
| 2 | $50,000 |
| 3 | $100,000 |
| 4 | $30,000 |
Project B is expected to generate net cash flows of $140,000 per year over the four year period.
Calculate
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