Answer:
Only projects C2 and C3 should be carried out since their net present value is positive ($5,630 and $15,329 respectively). While project C1 should be rejected because its NPV is negative.
Explanation:
C1 C2 C3
initial investment -$288,000 -$288,000 -$288,000
cash flow 1 $32,000 $116,000 $200,000
cash flow 2 $128,000 $116,000 $80,000
cash flow 3 $188,000 $116,000 $68,000
total $348,000 $348,000 $348,000
required rate of return =9%
NPV -$5,737 $5,630 $15,329
NPV C1 = -$288,000 + $32,000/1.09 + $128,000/1.09² + $188,000/1.09³ = -$5,737
NPV C2 = -$288,000 + $116,000/1.09 + $116,000/1.09² + $116,000/1.09³ = $5,630
NPV C3 = -$288,000 + $200,000/1.09 + $80,000/1.09² + $68,000/1.09³ = $15,329
