Calculate the project cash flow generated for Project A and Project B using the NPV method...

Calculate the project cash flow generated for Project A and Project B using the NPV method (Show your calculations): . Project A: Invest $10k today and receive $5k at the end of this year and for another 2 years (in 12 mos, in 24 mos, in 36 mos), for total cash inflows of $15k. Project B: Invest $55k today and receive $20k at the end of this year and for another 2 years (in 12 mos, in 24 mos, in 36 mos), for total cash inflows of $60k.

Discount rate = 10%

Solutions

Expert Solution

Project A

Net present value is calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$10,000. It is entered with a negative sign since it is a cash outflow.
Cash flow for each year should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 10%.
Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is $2,434.26.

Project B

Net present value is calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$55,000. It is entered with a negative sign since it is a cash outflow.
Cash flow for each year should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 10%.
Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is $5,262.96.

In case of any query, kindly comment on the solution.

jeff jeffy answered 1 month ago

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