1. The computation of the net present value of each project is as follows:
Project A Project B
NPV $36,523 $9,000
2. Based on the net present value approach, <u>Project A</u> should be adopted, instead of Project B.
<h3>What is the net present value?</h3>
The net present value is the difference between the costs and the annual cash inflows discounted to their present values.
<h3>Data and Calculations:</h3>
Project A Project B
Initial costs $103,000 $41,000
Annual cash inflows $34,441 $12,522
Project live 5 years 5 years
Rate of return 8% 8%
Annuity factor 3.993 3.993
PV of cash inflows $139,523 $50,000
NPV $36,523 $9,000
<h3>Question Completion:</h3>
1. Compute the net present value of each project.
2. Which project should be adopted based on the net present value approach?
Thus, based on the net present value approach, <u>Project A</u> should be adopted.
Learn more about the net present value at brainly.com/question/13228231
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