BUSI 530 NPV Assignment
The following are the cash flows of two independent projects:
Year Project A Project B
0 $(340) $(340)
1 170 240
2 170 240
3 170 240
4 170
a. If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Project A NPV
Project B NPV
b. Which of these projects is worth pursuing?
Project A
Project B
Both
Neither ------- ✔ CORRECT ANSWER ✓✓he NPV is computed as shown below:
= - Initial investment + Present value of future cash flows
,Present value is computed as follows:
= Future value / (1 + r)n
So, the NPV of Project A is computed as follows:
= - $ 340 + $ .101 + $ .102 + $ .103 + $ .104
= $ 198.88
The NPV of Project B is computed as follows:
= - $ 340 + $ .101 + $ .102 + $ .103
= $ 256.84
Since the NPV of both projects are positive, hence both projects shall be accepted.
Please ask in case of any doubts
The following are the cash flows of two projects:
YearProject AProject B
0$(390)$(390)
1 220 290
2 220 290
3 220 290
4 220
a. Calculate the NPV for both projects if the discount rate is 12%. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
,b. Suppose that you can choose only one of these projects. Which would you choose?
Project B
Project A
Neither ------- ✔ CORRECT ANSWER ✓✓Project A NPV = 278.22
Project B NPV = 306.53
Project B
The following are the cash flows of two projects:
Year Project A Project B
0 $(320)$(320)
1 150 220
2 150 220
3 150 220
4 150
If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not
round intermediate calculations. Round your answers to 4 decimal places.)
Project A
Project B ------- ✔ CORRECT ANSWER ✓✓Profitability Index
Project A = 0.4543
, Project B = 0.6801
The following are the cash flows of two projects:
Year Project A Project B
0$(340)$(340)
1 170 240
2 170 240
3 170 240
4 170
What is the payback period of each project? (Round your answers to 1 decimal place.)
Project A
Project B ------- ✔ CORRECT ANSWER ✓✓Payback Period
Project A = 2.0 years
Project B = 1.4 years
A project that costs $4,000 to install will provide annual cash flows of $1,300 for each of the
next 6 years.
a. What is NPV if the discount rate is 14%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
b. How high can the discount rate be before you would reject the project? (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) ------- ✔
CORRECT ANSWER ✓✓NPV = 1, 055.27
The following are the cash flows of two independent projects:
Year Project A Project B
0 $(340) $(340)
1 170 240
2 170 240
3 170 240
4 170
a. If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Project A NPV
Project B NPV
b. Which of these projects is worth pursuing?
Project A
Project B
Both
Neither ------- ✔ CORRECT ANSWER ✓✓he NPV is computed as shown below:
= - Initial investment + Present value of future cash flows
,Present value is computed as follows:
= Future value / (1 + r)n
So, the NPV of Project A is computed as follows:
= - $ 340 + $ .101 + $ .102 + $ .103 + $ .104
= $ 198.88
The NPV of Project B is computed as follows:
= - $ 340 + $ .101 + $ .102 + $ .103
= $ 256.84
Since the NPV of both projects are positive, hence both projects shall be accepted.
Please ask in case of any doubts
The following are the cash flows of two projects:
YearProject AProject B
0$(390)$(390)
1 220 290
2 220 290
3 220 290
4 220
a. Calculate the NPV for both projects if the discount rate is 12%. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
,b. Suppose that you can choose only one of these projects. Which would you choose?
Project B
Project A
Neither ------- ✔ CORRECT ANSWER ✓✓Project A NPV = 278.22
Project B NPV = 306.53
Project B
The following are the cash flows of two projects:
Year Project A Project B
0 $(320)$(320)
1 150 220
2 150 220
3 150 220
4 150
If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not
round intermediate calculations. Round your answers to 4 decimal places.)
Project A
Project B ------- ✔ CORRECT ANSWER ✓✓Profitability Index
Project A = 0.4543
, Project B = 0.6801
The following are the cash flows of two projects:
Year Project A Project B
0$(340)$(340)
1 170 240
2 170 240
3 170 240
4 170
What is the payback period of each project? (Round your answers to 1 decimal place.)
Project A
Project B ------- ✔ CORRECT ANSWER ✓✓Payback Period
Project A = 2.0 years
Project B = 1.4 years
A project that costs $4,000 to install will provide annual cash flows of $1,300 for each of the
next 6 years.
a. What is NPV if the discount rate is 14%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
b. How high can the discount rate be before you would reject the project? (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) ------- ✔
CORRECT ANSWER ✓✓NPV = 1, 055.27
