Answer:
C3 should be chosen
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
For project C1:
Cash flow in year 0 = $-252,000
Cash flow in year 1 =$20,000
Cash flow in year 2 =116,000
Cash flow in year 3 =176,000
I = 10%
NPV = $5,719
For project C2
Cash flow in year 0 = $-252,000
Cash flow in year 1 = $104,000
Cash flow in year 2 = $104,000
Cash flow in year 3 = $104,000
I = 10%
NPV = $6,633
For project C3
Cash flow in year 0 = $-252,000
Cash flow in year 1 = $188,000
Cash flow in year 2 =68,000
Cash flow in year 3 =56,000
I = 10%
NPV = $17,181
C3 should he accepted because it has the highest NPV
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
