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Tanya [424]
3 years ago
8

You are considering two projects. Project A has projected cash flows of $6,500, $4,500, and $2,500 for the next three years, res

pectively. Project B has projected cash flows of $2,500, $4,500, and $6,500 for the next three years, respectively. Assuming both projects have the same initial cost, you know that:
Business
1 answer:
Zinaida [17]3 years ago
7 0

Answer:

Project A is more valuable than Project B given a positive discount rate.

Explanation:

Let us assume the Discount Rate be r and cash flow for year n be CFn

Also

Let us assume initial Investment be X

So,  

NPV = ΣCFn ÷ (1+r)^n

NPVA = - X + 6500 ÷ (1 + r) + 4500 ÷ (1+r)^2 + 2500 ÷ (1+r)^3

NPVB = - X + 2500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 6500 ÷ (1+r)^3  

NPVA - NPVB = - X + 6500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 2500 ÷ (1+r)^3 - (- X + 2500 ÷ (1+r) + 4500 ÷ (1+r)^2 + 6500 ÷ (1+r)^3)

= 4000 ÷ (1+r) - 4000 ÷ (1+r)^3 = 4000(1 ÷ (1+r) - 1 ÷ (1+r)^3)

In the case when

Ir > 0, 1 ÷ (1+r) > 1 ÷ (1+r)^3

So,  

NPVA - NPVB > 0 => NPVA > NPVB

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Softa [21]

Answer: The answer is provided below

Explanation:

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b. The following are the effects it has on the investing section or the financing section of the statement of cash flows.

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The second transaction is non-cash transaction therefore, it will not be reported in either the financing or the investing activities.

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Thw diagram has been attached.

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zepelin [54]

Answer:

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Explanation:

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8 0
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Suppose Asarta Inc. is polluting yucko and they have been tasked with cleaning up some of their waste. The company decides to cl
uranmaximum [27]

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5 0
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sleet_krkn [62]

Answer:

supply chain management

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7 0
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Roger is a freelance accountant hired by Rudy’s Hot Dogs whenever auditing work is needed in the back office. Roger is called
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Answer:

C) Rudy's Hot Dogs will be liable to Roger if he makes any discrimination or wrongful discharge claims.

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