A firm is considering 2 capital investment projects. Project A involves an initial cost of $125,000. The discounted present value of all future cash flows is $145,000. Project B requires an initial expenditure of $85,000. The discounted present value of all future cash flows is $102,000.
-Calculate the net present value of each of the 2 projects. Which would be preferred according to the net present value criterion?
- -Calculate the profitability index of each of the 2 projects. Which would be preferred according to the profitability index criterion?
Discounted present value -125,000
$145,000 Project B
Discounted present value -85,000
$102,000 Net Present Value of A
Net Present Value of B
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Oct 14, 2020EXPERT
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