A company is evaluating two mutually exclusive projects B and C, each having a useful life of 3 years. B requires an immediate capital outlay of £1.2m while C required £1m. In the absence of cost and price inflation, the cash flows shown in the following table would remain constant throughout the life of the each project and arise at the end of each of the next three years.

Cash Flows B £ C £
Cash inflow from sale 1,000,000 800,000
Cash outflows
Labour 200,000 100,000
Materials 200,000 50,000
Other 20,000 150,000
(420,000) (300,000)
Net cash flows 580,000 500,000

However, it is now predicted that sales prices will increase by 10% p.a., labour costs by 20%, and material costs by 8%. The money cash flows of other costs are:

Project Yr 1 Yr 2 Yr 3
B 21,000 44,000 88,720
C 158,000 206,000 265,000

The nominal cost of capital is estimated to be 15% p.a.

a. Using the NPV method, determine which project is financially more attractive.
b. If the RPI is expected to increase by 10% p.a., calculate the real cost of capital.

Sherry Bishop of Thayer Industries is considering investing in a capital project that costs $1.2 million. The project is expected to generate after-tax operating cash flows equal to $500,000 in the first year and declining by $100,000 per year until the end of the project's life in five years. Assume that Thayer's nominal discou

The following information is available about an investment opportunity. Investment will occur at time 0 and sales will commence at time 1.
Initial cost $10 million
Unit sales 100,000
Selling price per unit, this year $50
Variable cost per unit, this year $20
L

Which of the following statements is incorrect?
a. Assuming a project has normal cash flows, the NPV will be positive if the IRR is less than the cost of capital.
b. If the multiple IRR problem does not exist, any independent project acceptable by the NPV method will also be acceptable by the IRR method.
c. If IRR = k

The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely Net Present Value (NPV) is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved:
Probability NPV
0.05 $-700,000
0.2 $-250,000
0.5 $120,000
0.2 $200,000
0.05 $300,000
a. What a

Hello, I want to know how to calculate the risk-adjusted NPV, i dont know what the formula is or how to find it.
I attached a table in my hw, not sure if this is the one which i need to use to find the risk npv.

Machine A and B are mutually exclusive and are expected to produce the follwing real cash flows. The real opportunity cost of capital is 10%.
Cash Flows (Thousands)
Machine Co C1 C2 C3
A -100 110 121 0
B -120 110 121 133
Calculate the NPV of each machine.
Calculate the equivalent annual cash flow fr

IS THE BEST ANSWER FOR THIS A or B ?? thanks!
Cherry Books is considering two mutually exclusive projects. Project A has an internal rate of return of 18 percent, while Project B has an internal rate of return of 30 percent. The two projects have the same risk, the same cost of capital, and the timing of the cash flows i

Photographic laboratories recover and recycle the silver used in photographic film. Stikine River photo is considering purchase of improved equipment for their laboratory at Telegraph Creek. Here is the information they have:
- The equipment costs $100,000 and will cost $80,000 per year to run.
- It has an economic life of 1

An investment has a total installed cost of $5,346. The cash flows over the four year life of the investment are projected to be $1,459, $2,012, $2,234, and $1,005.
a) If the discount rate is zero, what is the NPV?
b) If the discount rate is infinity, what is the NPV?
c) What is the IRR on the investment?
d) Based on th