Answer:
A) $56.5
Explanation:
Data:
Project S
Initial cost $10,000
Y1 CF = $6,000
y2 CF = $8,000
Project L
Initial Investment = $10,000
Y1-Y4 CF = $4,373
Solution:
<u>For Project S</u>
We shall prolong the project to four years so it can be easily compared to project L
Following shall be the cashflow stream:
Y0=-$10,000 Y1=$6,000 Y2=-$2,000($8,000 CF - $10,000 outlay for prolonging the project second time) Y3=$6,000 Y4=$8,000
Now to discount the cashflow


<u>For Project L</u>
In order to calculate present value of the annuity, following formula will be used:

<em>NPV = Initial outlay - PV</em>



Now, we can easily calculate how much value will the firm gain or lose if Project L is selected over Project S



<em>*all figures are rounded off to two decimal points*</em>
red and orange because tertiary colors are combinations with primary and secondary colours.
Well the quantity theory is "The hypothesis that changes in prices correspond to changes in the monetary supply" so when inflation happens the price will increase but when that happens the purchases and the value of money will decrease so will its demand. That's the speculation that the prices will not correspond to the monetary supply