Answer:
d
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
Investment A
Cash flow in year 0 = -$150
Cash flow in year 1 = $80
Cash flow in year 2 = $40
Cash flow in year 3 = $40
Cash flow in year 4 = $30
I = 10%
NPV = 6.33
Investment A
Cash flow in year 0 = -$150
Cash flow in year 1 = $40
Cash flow in year 2 = $50
Cash flow in year 3 = $60
Cash flow in year 4 = $55
I = 10%
NPV = 10.33
Project B has a higher NPV and it should be chosen
To find the NPV using a financial calculator:
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
