Welcome to Westonci.ca, the ultimate question and answer platform. Get expert answers to your questions quickly and accurately. Get immediate and reliable solutions to your questions from a knowledgeable community of professionals on our platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.
Sagot :
Answer: Project A is better as it has a higher NPV of $76,075.70
Explanation:
Annual cashflow of Project A = Annual cashflow + Depreciation
= 20,676 + 14,167
= $34,843
Project B cashflow = 6,011 + 4,800
= $10,811
As these are constant amounts, they are to be considered annuities.
Find the present value of these annuities and deduct the initial investment from them for the NPV.
Present value of annuity = Annuity * Present value interest factor of annuity, 8%, number of years
Project A NPV = (34,843 * Present value interest factor of annuity, 8%, 6 periods) - 85,000
= (34,843 * 4.6229) - 85,000
= $76,075.70
Project B NPV = (10,811 * Present value interest factor of annuity, 8%, 5 periods) - 24,000
= (10,811 * 3.9927) - 24,000
= $19,165.08
Project A is better as it has a higher NPV of $76,05.70

We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.