Answer:
Option B
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be found using a financial calculator.
For option A,
Cash flow in year 0 = -4500
Cash flow each year in year 1,2 and 4 = 2000
Cash flow in year 3 = 1000
I = 10%
NPV = $1,088.42
For option B,
Cash flow in year zero = -3500
Cash flow each year in year 1 and 3 = 1000
Cash flow in year 2 and 4 = 2000
I = 10%
NPV = $1,179.33
Choose the second option because its present value is greater than the first option.
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
