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Calculating NPV

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Year Project A Project B

0 -7500 -5000
1 4000 2500
2 3500 1200
3 1500 3000

Here's the question - if the payback period cutoff is 2 years, which project should I choose?

Also, if I use the NPV rule to rank the projects, which one should I choose if the discount rate is 15%

Thank you!

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Solution Summary

The expert calculates the NPV rule of ranks for a project.

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Here's the question - if the payback period cutoff is 2 years, which project should I choose?

Return After 2 years on A = -7500 + 4000 + 3500 = 0

Return After 2 years ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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