a. The CEO of your company notes that both projects cost the same, and both last for 5 years. Therefore, she suggests that the company pursue the project with the shortest payback. However, she does not want to be short sighted, and wants to know which project adds the most value to the company. What is the net present value of each project?
b. Considering the answers to questions 8, 9, and 10a., which project should you recommend to the CEO?
Consider the two mutually exclusive projects:
|
Year
|
Cash Flow Project A
|
Cash Flow Project B
|
|
0
|
-$25,000
|
-$25.000
|
|
1
|
4.000
|
8,000
|
|
2
|
5.000
|
7.000
|
|
3
|
5,000
|
5,000
|
|
4
|
7.000
|
5.000
|
|
5
|
10.000
|
4.000
|