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    Net Present Value

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    Use the information below to answer the following question(s).

    Consider the following two mutually exclusive projects, each of which requires an initial investment of $30,000 and both provide cash inflows of $60,000 as shown below. This organization has a 15% cost of capital.

    Year Project A Project B
    0 ($30,000) ($30,000)
    1 $30,000 $10,000
    2 20,000 20,000
    3 10,000 30,000

    Using the net present value criterion, which is the most desirable project?

    a. a. Project B
    b. b. Project A
    c. c. Both projects A and B are equally acceptable.
    d. d. The desirability cannot be determined using the current information.

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    https://brainmass.com/business/capital-budgeting/net-present-value-208223

    Solution Preview

    Consider the following two mutually exclusive projects, each of which requires an initial investment of $30,000 and both provide cash inflows of $60,000 as shown below. This organization has a 15% cost of capital.
    Year Project A Project B
    0 ($30,000) ($30,000)
    1 $30,000 $10,000
    2 20,000 20,000
    3 10,000 30,000

    Using the net present value criterion, which is ...

    Solution Summary

    Net Present Value of two mutually exclusive projects have been calculated to find the most desirable project.

    $2.19

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