Problem:
Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
YEAR PROJECT A PROJECT B
1 $5,000,000 $20,000,000
2 10,000,000 10,000,000
3 20,000,000 6,000,000
What are the two projects' net present values, assuming the cost of capital is:
a) 10%?
b) 5%?
c) 15%?