### [solution] » A firm is considering 2 capital investment projects. Project A involves an initial cost of \$125,0

Description

The Question

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?

Given,

Project A

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

Profitability Index:

A

B \$20,000...

#### Solution details

Solution #00070300

##### [solution] » A firm is considering 2 capital investment projects. Project A involves an initial cost of \$125,0.zip

This paper was answered on 14-Oct-2020

STATUS

QUALITY

Approved

Oct 14, 2020

EXPERT

Tutor

#### BEST TUTORS

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

• As a reference for in-depth understanding of the subject.
• As a source of ideas / reasoning for your own research (if properly referenced)
• For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. 