Answer:
NPV project A = $7.47 million
NPV project B = $14.98 million
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
For project A :
Cash flow in year 0 = -$16
Cash flow in year 1= $7
Cash flow in year 2 = $9
Cash flow in year 3 = $10
I = 5%
NPV = $7.47 million
For project B
Cash flow in year 0 = -$26
Cash flow in year 1 = $14
Cash flow in year 2 = $20
Cash flow in year 3 = $11
I = 5%
NPV = $14.98 million
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
