Answer:
1.
Net present value for Office expansion: $23,926
Net present value of Servers: $11,163
2.
Net present value for Office expansion: $4,062
Net present value of Servers: $11,163
Explanation:
1.
* Net present value for Office expansion:
Net present value = Present value of the 6 equal cashflow - Initial investment = (125,000/12%) x [1-1.12^(-6)] - 490,000 = $23,926;
* Net present value of Servers:
Net present value = Present value of the 4 equal cashflow - Initial investment = (165,000/12%) x [1-1.12^(-4)] - 490,000 = $11,163
2.
* Net present value of Servers is unchanged which is $11,163
* Net present value for Office expansion: Present value of the 4 equal cashflow + Present value of residual value in 4 years time - Initial investment = (125,000/12%) x [1-1.12^(-4)] + (180,000/1.12^4) - 490,000 = $4,062