# Capital Corporation

The following is a list of four projects that Capital Corporation must choose from for the coming year:

Project Project Price Annual Net Inflows

A 700,000 118,861

B 670,000 109,039

C 184,000 32,549

D 273,000 48,305

1. Given a uniform rate of interest of 9% and a uniform life of the projects of 10 years each, calculate the NPVs of each Project (To calculate NPV, calculate the Present Value of a 10 year annuity, and subtract the project price. The formula for the present value factor of an annuity is given below where r is the rate of interest and n is the number of years. To get the present value of the stream of annuities multiply the PVF by the amount you get each year.)

2. Why should we choose either Projects A, C, D or Projects A, B, D?

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#### Solution Preview

The following is a list of four projects that Capital Corporation must choose from for the coming year:

Project Project Price Annual Net Inflows

A 700,000 118,861

B 670,000 109,039

C 184,000 32,549

D 273,000 48,305

1. Given a uniform rate of interest of 9% and a uniform life of the projects of 10 years each, calculate the NPVs of each Project (To calculate NPV, calculate the Present Value of a 10 year ...

#### Solution Summary

This solution is comprised of a detailed explanation to determine the NPV for 4 projects and answer why should we choose

either Projects A, C, D or Projects A, B, D.