Problem 12-23 Net present value profile [L012-41 use a net present value pot le
ID: 2515837 • Letter: P
Question
Problem 12-23 Net present value profile [L012-41 use a net present value pot le in comparing the progets The inestment and cash now patterns are as tkis UseAppen ukr anappromate ?seer b tokate your (520,000 6,000 5,000 4,000 10,000 a. on a zero percent discount rate Project H calculations and round your answers to 2 decimal places.) b. Determine the net present value of the projects based on a 9 percent discount rate. (Do not round intermediate Net Present Value C. If the projects are not mutualy excusive, which poject(s)would you accept tthe discort re is 9 percent? O Project E O Project H O Both H and E O Neither H nor E O Type here to searchExplanation / Answer
Answer = A) CALCULATION OF THE NPV OF THE PROJECT E CALCULATION OF THE NPV OF THE PROJECT H Years Cash Flow Years Cash Flow 0 $ -20,000 0 $ -20,000 1 $ 5,000 1 $ 16,000 2 $ 6,000 2 $ 5,000 3 $ 7,000 3 $ 4,000 4 $ 10,000 Total $ 8,000 Total $ 5,000 Answer = Present Value of the Project with zero % of discounting Project E = 8000 Project H = 5000 Answer = B) CALCULATION OF THE NPV OF THE PROJECT E WITH 9% DISCOUNTING RATE Years Cash Flow PVF @ 9 % Present Value 0 $ -20,000 1.0000 $ -20,000 1 $ 5,000 0.9174 $ 4,587 2 $ 6,000 0.8417 $ 5,050 3 $ 7,000 0.7722 $ 5,405 4 $ 10,000 0.7084 $ 7,084 Total $ 2,127 CALCULATION OF THE NPV OF THE PROJECT H WITH 9% DISCOUNTING RATE Years Cash Flow PVF @ 9 % Present Value 0 $ -20,000 1.0000 $ -20,000 1 $ 16,000 0.9174 $ 14,679 2 $ 5,000 0.8417 $ 4,208 3 $ 4,000 0.7722 $ 3,089 Total $ 1,976 Answer = Present Value of the Project with 9 % of discounting Project E = $ 2,127 Project H = $ 1,976 Answer = C) Option 3 = Both H & E With the dicount rate 9% both the projects have the positive cash balance so both project will accept