Please explain 23. Carol, Inc. is considering three different independent invest
ID: 2528400 • Letter: P
Question
Please explain
23. Carol, Inc. is considering three different independent investment opportunities. The present value of future cash flows, initial investment, and net present value for each of the projects are as follows Project A Project B Project C $250,000 $275,000 Present value of future cash flows Initial investment Net present value $300,000 50.000 150,000 105.000 S145,000 140.000 $135,000 In what order should C A. A, C, EB B. B. C, A C. A, B, C D. B, A, C arol prioritize investment in the projects?Explanation / Answer
The correct answer is C. A,B,C
The projects are chosen on the basis of their Net Present Values.The project with the highest Net Present Value is always chosen over the projects with the lower Net Present Value
In the given Case the Project A has a Net Present Value of $ 150,000 which is higher than the Net Present Value of Project B. Also, Net Present Value of project B is higher than that of project C.
Hence A is preferred first, Project B is preferred next and lastly project C is chosen.