can you please help me with this (please solve it, DON\'T use any programs to do

Question

can you please help me with this (please solve it, DON'T use any programs to do it)

You have 2 projects with the following specifications the cash flow (positive & negative) and the initial investments are shown. If NPV (Net Present Value) is the only criterion for the selection, which project do you choose? Show your work. The IRR (Internal Rate of Return) of the company is 12%. $2,000 12,000$5,000 $15,000 $10,000 Project A Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $15,0000 $12,000 $2,0000 $0.0 $20,000 $1,000 Project B Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $5,0000

Explanation / Answer

Project A
NPV = (2000/(1+0.12)^1)+(12000/(1+0.12)^2)+(5000/(1+0.12)^3)+(15000/(1+0.12)^4)-(150000/(1+0.12)^5)+(10000/(1+0.12)^6)
= 1785.71+9566.32+3558.90+9532.77-85114.02+5066.31 = -$55604

Project B
NPV = (12000/(1+0.12)^1)+(20000/(1+0.12)^2)+(0/(1+0.12)^3)+(20000/(1+0.12)^4)-(50000/(1+0.12)^5)+(1000/(1+0.12)^6)
= 10714.28+15943.87+0+12710.36-28371.34+506.63 = $11503.81

Since the NPV of project B is positive and greater than project A, project B needs to be selected.

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