question archive A firm is evaluating two projects
A firm is evaluating two projects
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A firm is evaluating two projects. The firm's cost of capital (appropriate discount rate) has been determined to be 9%, and the projects have the following initial investments and cash flows. Initial Investment Cash Flows 1 2 3 4
Project O P50,000 P20,000 P25,000 P15,000 P20,000
Project Y 248,000 P30,000 P35,000 240,000 P10,000
1. Determine the NPV of each project
2. Which project should the company pursue? Why?
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Answer:
Npv :- project O = 15,141.5
project Y = 46,953.5
Answer :- Y
Reason :- project Y has HIGH npv i.e 31,812 (46,953.5-15,141.5)
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