There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28,000 and is expected to generate the following cash flows: Q:If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen. Year 1Year 2Year 3TotalAlpha ProjectBeta Project22,00012,70023,50022,0005,00015,80050,50050,500

The aim of the investors will be increase the profitability from the investment. The investors will…

Answered: There are two projects under…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28,000 and is expected to generate the following cash flows:

If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.

Year 1
Year 2
Year 3
Total
Alpha Project
Beta Project
22,000
12,700
23,500
22,000
5,000
15,800
50,500
50,500

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