The following are the cash flows of two projects: Year Project A Project B 0 $ (400 ) $ (400 ) 1 230 300 2 230 300 3 230 300 4 230 a. Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

The following are the cash flows of two projects: Year Project A Project B 0 $ (400 ) $ (400 ) 1 230 300 2 230 300 3 230 300 4 230 a. Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EB: Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two,...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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The following are the cash flows of two projects:

Year	Project A	Project B
0	$	(400	)	$	(400	)
1		230			300
2		230			300
3		230			300
4		230

a. Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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