Consider the cash flow data in the table below for two competing investment proj
ID: 1143282 • Letter: C
Question
Consider the cash flow data in the table below for two competing investment projects. At i= 1 1%, which of the two projects would be a better choice? Click the icon to view the cash flows for the investment projects. Click the icon to view the interest factors for discrete compounding w en/-11% per year More Info The PW value for project A is (Round to the nearest dollar.) qual Payment Series- More Info Capital Recovery Factor Compound Present Compound Sinking Amount Factor Fund Factor Factor Factor Factor (FIA, i, N) (A/F, i, N) (PIA, i, N) (A/Pi, N) 1.1100 1.2321 1.3676 1.5181 1.6851 0.9009 0.8116 0.7312 0.6587 0.5935 1.0000 2.1100 3.3421 4.7097 6.2278 1.0000 0.4739 0.2992 0.2123 0.1606 0.9009 1.7125 2.4437 3.1024 3.6959 1.1100 0.5839 0.4092 0.3223 0.2706 Cash Flow Data (Unit: $ thousand) n Project A Project B -$1,000 - 1,200 -485 965 -700 870 885 1,190 1,970 1,660 940 1.8704 2.0762 2.3045 2.5580 2.8394 0.5346 0.4817 0.4339 0.3909 0.3522 7.9129 9.7833 11.8594 14.1640 16.7220 0.1264 0.1022 0.0843 0.0706 0.0598 4.2305 4.7122 5.1461 5.5370 5.8892 0.2364 0.2122 0.1943 0.1806 0.1688 1,335 1,725 450 910 900 Print Done Print DoneExplanation / Answer
Ans to the blank: $2,320,490
Explanation:
The PW of project A = $2320.49 * 1000 = $2,320,490
The PW of project B = $1663.72 * 1000 = $1,663,720
[1000 is multiplied here because in the table it is written $ thousands]
Since PW of project A is greater than project B, thetefore, project A is a better choice.
Csah flow($ thousands) Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 n Project A Project B PV factor = (P/F, 11%,n) Discounted cash flow of Project A = Col 2 * Col 4 Discounted cash flow of Project B = Col 3 * Col 4 0 -1000 -3200 1 -1000.00 -3200.00 1 -1200 -700 0.9009 -1081.08 -630.63 2 485 870 0.8116 393.63 706.09 3 965 885 0.7312 705.61 647.11 4 965 1190 0.6587 635.65 783.85 5 1335 1970 0.5935 792.32 1169.20 6 1725 1660 0.5346 922.19 887.44 7 555 940 0.4817 267.34 452.80 8 555 810 0.4339 240.81 351.46 9 325 450 0.3909 127.04 175.91 10 900 910 0.3522 316.98 320.50 Total 2320.49 1663.72