Selection of project for the opportunity cost of capital


Please assist with the given problem. Provide your solutions in Excel.

Mutual exclusive investment
Here are the cash flow forecast for two mutually exclusive projects:
Cash Flows, Dollars

Year Project A Project B
0 -$100 -$100
1 30 49
2 50 49
3 70 49

Which project would you choose if the opportunity cost of capital is 2 percent?

Which would you choose if the opportunity cost of capital is 12 percent?

Why does you answer change?

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Finance Basics: Selection of project for the opportunity cost of capital
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