The present value of the total costs over a five-year period for TopNotch Investment is $50,000.The present value of total costs over the same five-year period for BotomLine Investment is $40,000.The company uses a discount rate of 9%.There are no positive cash flows for these projects, but one or the other is required to comply with government regulations.Which project should be chosen and why?
A)TopNotch because it has a higher net present value (NPV).
B)Both projects because they will add value to the company.
C)Neither project because the NPVs are negative.
D)BottomLine because it has a lower net present cost.

Question

Quizplus · Accepted Answer

The company should choose BottomLine Investment because it has a lower present value of total costs, which means it will require less investment upfront. Since there are no positive cash flows for these projects, choosing the project with the lower net present cost is preferred.

The Present Value of the Total Costs Over a Five-Year