Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for seven years. Project B has a calculated net present value of $13,500 over a four-year life. Project A could be sold at the end of four years for $25,000.
(a) Using the table below, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%.
(b) Which project provides the greatest net present value?Below is a table for the present value of $1 at compound interest. Below is a table for the present value of an annuity of $1 at compound interest.

Question

Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for seven years. Project B has a calculated net present value of $13,500 over a four-year life. Project A could be sold at the end of four years for $25,000. 
(a) Using the table below, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. 
(b) Which project provides the greatest net present value?Below is a table for the present value of $1 at compound interest.​  Below is a table for the present value of an annuity of $1 at compound interest.

Quizplus · Accepted Answer

The Answer of Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for seven years. Project B has a calculated net present value of $13,500 over a four-year life. Project A could be sold at the end of four years for $25,000. 
(a) Using the table below, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. 
(b) Which project provides the greatest net present value?Below is a table for the present value of $1 at compound interest.​  Below is a table for the present value of an annuity of $1 at compound interest.

Project a Requires an Original Investment of $50,000