# Net Present Value

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.

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.