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    Capital Budgeting and Prospective Cash Inflows

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    The following table shows two schedules of prospective operating cash inflows, each of which requires the same net initial investment of $10,000 now:

    Annual Cash Inflows

    Year_________Plan A________Plan B

    1____________$1,000________$5,000

    2_____________2,000_________4,000

    3_____________3,000_________3,000

    4_____________4,000_________2,000

    5_____________5,000_________1,000

    Total_______$15,000_______$15,000

    The required rate of return is 6% annually. All cash inflows occur at the end of each year. In terms of net present value, which plan is more desirable? Show your computations.

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