Answer:
d. both joe and rich
Explanation:
To determine who should accept the project, the net present value should be calculated.
The net present value is the present value of after tax cash flows from an investment less the amount invested.
The net present value can be calculated using a financial calculator
Cash flow in year 0 = -$25,000
Cash flow in year 1 = 13,700
Cash flow in year 2 = 18,400
Rich 's discount rate = 16%
Richs NPV = $484.54
Joe's discount rate = 9%
Joes NPV = $3,055.72
The decision rule with NPV is to invest if NPV is greater than zero
Since NPV is greater than zero for both rich and joe, they should both accept it.
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
